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Full text of "Healthy Meals for Healthy Americans Act of 1994 (commodity letter of credit--CLOC) : hearing before the Subcommittee on Department Operations and Nutrition of the Committee on Agriculture, House of Representatives, One Hundred Third Congress, second session, on H.R. 8, June 9, 1994"

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(l^ HEALTHY MEALS FOR HEALTHY 
fw AMERICANS ACT OF 1 994 

\Vi (Commodity Letter of Credit— CLOQ 



i 4. AG 8/1:103-74 

fealthy Heals for Healthy Anericans... ____^ 

JIING 

BEFORE THE 

SUBCOMMITTEE ON DEPARTMENT OPERATIONS 

AND NUTRITION 

OF THE 

COMMITTEE ON AGRICULTURE 
HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

SECOND SESSION 
ON 

H.R. 8 



JUNE 9, 1994 



Serial No. 103-74 







Printed for the use of the Committee on Agriculture 



U.S. GOVERNMENT PRINTING OFFICE 
82-893 WASHINGTON : 1994 

For sale by the U.S. Government Printing Office 
Superintendent of Documents. Congressional Sales Office, Washington. DC 20402 
ISBN 0-16-045870-6 



on or\o /-\ r\ a t 




HEALTHY MEALS FOR HEALTHY 
AMERICANS ACT OF 1994 

(Commodity Letter of Credit— CLOQ 



iT 4. AG 8/1:103-74 

-lealthy Heals for Healthy Anericans. . . DT1 , T/ ^, 

BEFORE THE 

SUBCOMMITTEE ON DEPARTMENT OPERATIONS 

AND NUTRITION 

OF THE 

COMMITTEE ON AGRICULTURE 
HOUSE OP REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

SECOND SESSION 
ON 

rl.R. 8 



JUNE 9, 1994 



Serial No. 103-74 










Printed for the use of the Committee on Agriculture 



U.S. GOVERNMENT PRINTING OFFICE 
82-893 WASHINGTON : 1994 

For sale by the U.S. Government Printing Office 
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 
ISBN 0-16-045870-6 



COMMITTEE ON AGRICULTURE 



E (KIKA) de 

GEORGE E. BROWN, Jr., California, 

Vice Chairman 
CHARLIE ROSE, North Carolina 
DAN GLICKMAN, Kansas 
CHARLES W. STENHOLM, Texas 
HAROLD L. VOLKMER, Missouri 
TIMOTHY J. PENNY, Minnesota 
TIM JOHNSON, South Dakota 
BILL SARPALIUS, Texas 
JILL L. LONG, Indiana 
GARY A. CONDIT, California 
COLLIN C. PETERSON, Minnesota 
CALVIN M. DOOLEY, California 
EVA M. CLAYTON, North Carolina 
DAVID MINGE, Minnesota 
EARL F. HILLIARD, Alabama 
JAY INSLEE, Washington 
THOMAS J. BARLOW III, Kentucky 
EARL POMEROY, North Dakota 
TIM HOLDEN, Pennsylvania 
CYNTHIA A. McKINNEY, Georgia 
SCOTTY BAESLER, Kentucky 
KAREN L. THURMAN, Florida 
SANFORD D. BISHOP, Jr., Georgia 
BENNIE G. THOMPSON, Mississippi 
SAM FARR, California 
PAT WILLIAMS, Montana 
BLANCHE M. LAMBERT, Arkansas 



LA GARZA, Texas, Chairman 

PAT ROBERTS, Kansas, 

Ranking Minority Member 
BILL EMERSON, Missouri 
STEVE GUNDERSON, Wisconsin 
TOM LEWIS, Florida 
ROBERT F. (BOB) SMITH, Oregon 
LARRY COMBEST, Texas 
WAYNE ALLARD, Colorado 
BILL BARRETT, Nebraska 
JIM NUSSLE, Iowa 
JOHN A. BOEHNER, Ohio 
THOMAS W. EWING, Illinois 
JOHN T. DOOLITTLE, California 
JACK KINGSTON, Georgia 
BOB GOODLATTE, Virginia 
JAY DICKEY, Arkansas 
RICHARD W. POMBO, California 
CHARLES T. CANADY, Florida 
NICK SMITH, Michigan 
TERRY EVERETT, Alabama 
FRANK D. LUCAS, Oklahoma 



Professional Staff 

Dianne Powell, Staff Director 

Vernie Hubert, Chief Counsel and Legislative Director 

Gary R. Mitchell, Minority Staff Director 

James A. Davis, Press Secretary 



Subcommittee on Department Operations and Nutrition 



CHARLES W. 
GEORGE E. BROWN, Jr., California, 

Vice Chairman 
BILL SARPALIUS, Texas 
CALVIN M. DOOLEY, California 
JAY INSLEE, Washington 
DAN GLICKMAN, Kansas 
CYNTHIA A. McKINNEY, Georgia 
SANFORD D. BISHOP, Jr., Georgia 
HAROLD L. VOLKMER, Missouri 
EVA M. CLAYTON, North Carolina 
TIM HOLDEN, Pennsylvania 
CHARLIE ROSE, North Carolina 
SAM FARR, California 
TIM JOHNSON, South Dakota 
EARL POMEROY, North Dakota 
BLANCHE M. LAMBERT, Arkansas 



STENHOLM, Texas, Chairman 

ROBERT F. (BOB) SMITH, Oregon 
BILL EMERSON, Missouri 
STEVE GUNDERSON, Wisconsin 
WAYNE ALLARD, Colorado 
BILL BARRETT, Nebraska 
JOHN A. BOEHNER, Ohio 
THOMAS W. EWING, Illinois 
JACK KINGSTON, Georgia 
CHARLES T. CANADY, Florida 



(ID 



CONTENTS 



Page 
Stenholm, Hon. Charles W., a Representative in Congress from the State 

of Texas, opening statement 1 

Response to written question 25 

Witnesses 

Goodling, Hon. William F., a Representative in Congress from the State 

of Pennsylvania 3 

Prepared statement 52 

Haas, Ellen, Assistant Secretary, Food and Consumer Services, U.S. Depart- 
ment of Agriculture 12 

Prepared statement 63 

Letter of June 27, 1994 27 

Holstein, Pat, director, food service, Lexington School District 3, Batesburg, 

SC 41 

Prepared statement 82 

Hurt, Marilyn A., chair, public policy and legislative committee, American 

School Food Service Association 35 

Prepared statement 72 

Miller, Catherine, president, American Commodity Distribution Association ... 37 

Prepared statement 77 

Pasco, Richard, vice president, government affairs, National Pork Producers 

Council, on behalf of the Commodity Distribution Coalition 44 

Prepared statement 86 

Submitted Material 

American Association of Classified School Employees, statement 93 

Johnson, Elizabeth K., manager, food policy, National Cattlemen's Associa- 
tion, statement 99 

Jones, Jean Yavis, Specialist, Food and Agriculture Policy, Environment and 
National Resources Division, Congressional Research Service, Library of 
Congress, subject "Commodity donations to child nutrition programs" 101 

(III) 



HEALTHY MEALS FOR HEALTHY AMERICANS 

ACT OF 1994 



THURSDAY, JUNE 9, 1994 

House of Representatives, 
Subcommittee on Department 

Operations and Nutrition, 
Committee on Agriculture, 

Washington, DC. 

The subcommittee met, pursuant to call, at 2 p.m., in room 1300, 
Longworth House Office Building, Hon. Charles W. Stenholm 
(chairman of the subcommittee) presiding. 

Present: Representatives Sarpalius, Dooley, Inslee, Volkmer, 
Fair, Pomeroy, Gunderson, Ewing, and Canady. 

Staff present: Julia M. Paradis, assistant counsel; Jan Rovecamp, 
clerk; Anita R. Brown and Lynn Gallagher. 

OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. Stenholm. The subcommittee will come to order. 

Good afternoon, and welcome to this hearing on certain provi- 
sions of H.R. 8 which are of great interest to this subcommittee. As 
you all know, the Healthy Meals for Healthy Americans Act of 
1994 was recently reported out of the Committee on Education and 
Labor. It has been sequentially referred to the Committee on Agri- 
culture. This important legislation will reauthorize the national 
school lunch program and the child nutrition programs. 

I commend Chairman Ford and subcommittee Chairman Dale 
Kildee, and the other Members on the Committee of Education and 
Labor for their hard work in crafting a bill, during a time of ex- 
ceedingly scarce resources, that maintains and improves these vital 
nutrition programs. 

This afternoon we will review several provisions in the bill that 
would expand the commodity letter of credit, or CLOC, provisions 
of the national School Lunch Act and make the CLOC demonstra- 
tion projects permanent. For those not familiar with the CLOC 
projects, let me take a minute to explain them. 

Over 15,000 school districts participate in USDA's national 
school lunch program. These school districts receive cash subsidies 
and agricultural commodities purchased by USDA under price sup- 
port and surplus removal programs. Schools are entitled under the 
national School Lunch Act to receive commodities equal in value to 
14 cents per meal. These commodities are called "entitlement com- 
modities." Additional commodities are distributed to schools when 

(l) 



such commodities are available. These commodities are called 
"bonus commodities." 

In 1980, the Congress enacted legislation which required USDA 
to implement a 3-year demonstration project to test the feasibility 
of replacing donated entitlement commodities with additional cash 
payments or commodity letters of credit. 

Twenty-nine school districts receive checks equivalent to the 
value of the USDA entitlement commodities that they would other- 
wise receive, and another 26 school districts receive commodity let- 
ters of credit, instead of the entitlement commodities that they 
would otherwise receive, to purchase specific commodities or prod- 
ucts containing those commodities from local sources within a des- 
ignated time period. 

The authority for these demonstration projects has three times 
been extended and will expire at the end of this fiscal year. H.R. 
8, as reported by the Committee on Education and Labor, provides 
three CLOC provisions. The first would make permanent the cur- 
rent cash and CLOC demonstration sites. 

The second provision would authorize one statewide CLOC dem- 
onstration program in a State where 80 percent or more of the 
school districts participating in the school lunch program elect to 
participate in the statewide CLOC program. 

The third provision would authorize the Secretary of Agriculture 
to provide to schools a commodity letter of credit in an amount 
equal to 10 percent of their commodity entitlement to be used to 
purchase fresh fruits and vegetables. 

The U.S. Department of Agriculture and agricultural commod- 
ities producers have informed us that they oppose continuation and 
expansion of the use of CLOC's. We look forward to hearing from 
them this morning, or this afternoon. 

We also look forward to hearing from Congressman Goodling, 
who has long been a strong supporter of the CLOC provisions of 
H.R. 8. And we are fortunate to have with us the food service direc- 
tor from a CLOC site in South Carolina, and her testimony will de- 
scribe for us how the CLOC system works for her school. 

We have asked our witnesses to discuss not only the CLOC pro- 
visions of H.R. 8, but also how well the CLOC mechanism achieves 
the dual goals of the commodity distribution program in the na- 
tional school lunch program. Those goals are to provide nutritious 
food to the schools and to help stabilize agricultural markets. We 
are equally interested in learning how well the commodity distribu- 
tion program achieves these two goals. 

As we try to resolve this controversial issue, let me make clear 
my commitment to working with USDA, schools, and agricultural 
producers in making the commodity distribution program as user 
friendly for school food service directors as possible. Those of us at 
the Committee on Agriculture obviously want this program to work 
well for the agricultural community. But, we are equally committed 
to making this program work well for schools. 

I understand that significant improvements have been made in 
the commodity distribution program since the Commodity Distribu- 
tion Reform Act of 1987. If additional reforms are needed, I want 
to know about them. And I will work to see that they are imple- 
mented. Just as we are concerned that CLOC does not meet the 



goal of stabilizing agricultural markets, we are also concerned if 
the commodity distribution program does not meet the needs of 
schools. 

I hope that schools will feel free to discuss with the subcommit- 
tee at any time any concerns they might have with the commodity 
distribution program. I look forward to the testimony of our wit- 
nesses on this important issue, and thank each you for taking time 
to be with us today. 

[H.R. 8 is held in the committee files.] 

Mr. Stenholm. I call our first witness, the Honorable William F. 
Goodling, a Member of Congress from Pennsylvania. Bill, welcome. 

STATEMENT OF HON. WILLIAM F. GOODLING, A REPRESENTA- 
TIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. Goodling. Thank you, Mr. Chairman. 

I would like to say that I will go a little more in depth than I 
normally would in testimony because I think it is an issue that we 
all need to know, if we are going to do what you just said in your 
opening remarks, work to make sure that these programs work for 
all people. 

I preface that by saying that some years ago, I was coming from 
Carlisle back to York and I stopped at Peters' Orchard. Mr. Peters 
came out and said, you have to stop this CLOC — because he was 
brainwashed from people in Washington — boy, we can't have that. 
About 3 months later, I came by and bought a few more things 
from him and he came out and he said, you know what just hap- 
pened? Bermudian Springs just canceled our apple order because 
they got a shipment in from Washington State. And I said, Mr. Pe- 
ters, that is what I was trying to tell you before. We can remove 
surpluses early on and leave the Department of Agriculture in total 
control through CLOC. 

I want to say up front that it is not my intention to try to replace 
the current commodity distribution program. I understand the im- 
portance of the program and I understand how important it was in 
the past when we had a lot of surplus commodities. Fortunately, 
some of the programs are now working, that you instituted, and so, 
in many situations those commodities are not out there. 

As many of you are aware, I was reared on a farm and I have 
a great deal of respect for our Nation's farm community. I rep- 
resent a district which depends heavily on agriculture, and I am 
proud to say that the district I represented was represented by my 
father who was a member of the Agriculture Committee here in DC 
for many years. 

However, as a former principal, teacher, school board president, 
superintendent of schools, I also know firsthand the importance of 
proper nutrition to a child's performance in school, and, as a result, 
I strongly believe we need to ensure that there is a proper balance 
between our need to remove surplus commodities from the market- 
place and our need to provide schoolchildren with healthy, nutri- 
tious meals which they will eat. Therefore, we need to ensure that 
the current commodity system is well-received by the schools and 
that the commodities which are provided to schools are acceptable 
to the participating children. 



As you probably are aware, at the present time only 46 percent — 
I repeat, only 46 percent of paying children participate in the na- 
tional school lunch program. To me, this is an indication that the 
meals currently offered under the national school lunch program 
must be improved so that they appeal to a larger number of chil- 
dren. Part of the improvement in meals must be an improvement 
in the types of commodities provided to the schools. For example, 
students who have not been exposed to salmon, figs, dates, and so 
on, may not eat them no matter how nutritious they are or how 
they are used by the school food service personnel. Children tend 
to consume what they have been exposed to in their homes and 
many children have not had experience with some of the commod- 
ities offered through the commodity distribution system. 

I do recognize that efforts have been made over the past years 
to improve the current commodity distribution system and to ad- 
dress the problems which were behind the development of the origi- 
nal cash/CLOC that Mr. Ford and I pushed for many years. 

Let me indicate here, Mr. Chairman, that I also think that it was 
our effort that helped to improve the commodity distribution pro- 
gram. For 10 years before that, I sat in committee and listened to 
all of these school food service people testify with the most horren- 
dous stories you ever wanted to hear. We were always promised 
that the commodity distribution system would be improved. How- 
ever, those same people who testified also were pretty well brain- 
washed and they said, but we can't do anything differently because 
if you put cash or CLOC out there and they don't get appropriated, 
then all of a sudden we won't have anything. 

Well, you can't have it both ways. So I have to believe that the 
CLOC/cash effort had something to do with your efforts to improve 
the commodity distribution program. 

I am here today, however, even though many of those earlier 
problems continue to exist, in a spirit of cooperation. I would like 
to see the current commodity program improved to the point where 
we do not need the cash/CLOC alternative. And I am willing to 
work with you toward such an end. 

In the meantime, however, I would like to acquire your support 
for the cash/CLOC provisions contained in H.R. 8. 

First and foremost, there is the provision making the current 
cash/CLOC sites permanent. As you will recall, cash/CLOC was de- 
veloped at a time when there was a great deal of dissatisfaction 
with the commodity distribution system. Some of those problems 
included: High storage and transportation costs; receipt of commod- 
ities which were in poor condition; arrived at the wrong time of the 
school year; did not fit into the menu or meet the tastes of stu- 
dents; and receipt of commodities which were in a form that re- 
quired a lot of processing. 

Under the commodity letter of credit — CLOC — I also say that the 
Department has the best of both worlds. The school districts are 
provided with commodity letters of credit which they use to buy 
foods that contain specific types of commodities which the U.S. De- 
partment of Agriculture distributes under the regular commodity 
distribution program. They hold the key as to what it is these peo- 
ple can buy locally with their commodity letter of credit. In other 
words, those school districts participating in CLOC purchase locally 



and in the form they prefer, the same commodities which USDA is 
providing to schools through the commodity distribution program. 

Now you have heard many times the argument will be, "Well, if 
you don't keep a strong commodity distribution program, then we 
can't distribute our commodities." I always laugh about that be- 
cause here is Kansas spread all over the West, and they get cash, 
but they also get their bonus commodities and have no problems 
whatsoever distributing their bonus commodities all over the State 
of Kansas. 

Participants in the cash/CLOC program have the option of drop- 
ping out of these alternative projects at any time. However, none 
of the sites is currently interested in returning to the current sys- 
tem until such time as their original concerns have been addressed. 
They are not set up to participate in the current system and do not 
have the storage space to accommodate the commodities they 
would receive. Yet, every 2 to 4 years, they face the uncertainty of 
what the next year will bring and the problem of incurring costs 
related to returning to the current commodity distribution system. 

Mr. Chairman, according to the participants in the cash/CLOC 
option, there are numerous benefits to the option: First, the re- 
moval of thousands of pounds of meat, vegetables, and fruits from 
the marketplace at their convenience without any additional cost to 
the taxpayer is one of the pluses of CLOC. 

Second, a variety of menus, including those low in fat content — 
and you are going to hear that over and over and over again from 
Ms. Haas if she is not here today, she has been here before you 
before, I am sure, because she has been before our committee — and 
they can plan these without the interruption of unexpected com- 
modity deliveries; the conversion of administrative cost savings to 
additional menu options; ability to purchase commodities in a form 
most preferable to children, including the ability to purchase the 
commodities which reflect the regional, cultural, and religious food 
preferences of students and that cuts down on plate waste. 

Third, the increased ability to cut fat from the menu and serve 
fresh fruits and vegetables. 

Fourth, decreased reliance on canned fruits and vegetables. 

Fifth, more effective operation of school kitchens due to the elimi- 
nation of the necessity of dealing with commodity deliveries and 
the time necessary to transport them from school to school; the 
ability to serve a more diverse menu to students; the ability to sup- 
port locally owned companies and State agriculture; increased stu- 
dent participation; the ability of the district to control the type of 
products they buy and delivery times during the year; reduced need 
for large dry storage and freezer space; the ability to limit in- 
creases in the cost of the school lunch and breakfast programs; and 
the ability to receive adequate supplies of commodities to serve all 
students and to purchase commodities which do not require special 
processing or are labor intensive. This is just a small list of those 
that we have received from people participating in the program. 

I have actually heard from a large number of school food service 
directors who are interested in becoming a cash/CLOC site. But at 
this point, Mr. Chairman, I am not seeking an expansion of the 
cash/CLOC sites. Rather, I just want to provide the current cash/ 
CLOC sites with peace of mind and assure them that they may 



continue to operate alternative programs until such time as they 
decide to drop out. In the meantime, I would like to work with you 
to improve the current commodity program to the point where cur- 
rent cash/CLOC sites would be more than willing to return to the 
current system. 

I am also interested in allowing all schools to use CLOC to in- 
crease the number of fresh fruits and vegetables in the school meal 
program and have included such a provision in H.R. 8. 

Part of our effort to improve the nutritional content of the school 
lunch and breakfast program will be to support the Department of 
Agriculture's efforts to increase fresh fruits and vegetables served 
to children participating in the school lunch program. 

During hearings held by USDA prior to the development of their 
new nutrition objectives for schools, they heard from witnesses who 
requested an increase in fresh fruits and vegetables in the school 
meal programs and requested increased purchasing flexibility for 
local school food service authorities. In my view, the commodity let- 
ter of credit will provide us with the best possible mechanism to 
accomplish this goal until USDA is able to do so through the cur- 
rent system and in a manner acceptable to schools. Through the 
CLOC program, schools will be able to purchase fruits and vegeta- 
bles locally, thus ensuring that they are fresh and in quantities 
most easily utilized by the school food service personnel. 

I would like to provide you with a few examples of why we cur- 
rently need an alternative mechanism to increase fresh fruits and 
vegetables in school lunch programs. 

One school district was recently informed that their bonus com- 
modities — fresh apples, pears, and grapefruits — would arrive at the 
distributors the week before spring break. This would not have 
happened had the school been able to purchase those commodities 
with CLOC. The prospect of spoilage was great under these cir- 
cumstances. 

A school in California received fresh oranges, of which more than 
50 percent had to be discarded due to molding. 

A school district in Pennsylvania received cases of fresh pears, 40 
pounds per case, and found that there was not one usable whole 
fruit in any of the cases. This same school also received potatoes 
which were unusable but for which they had to pay a delivery fee 
and then dispose of them. And they still had them charged against 
their allocation. 

A school district in Nevada shared with me their experience with 
fresh tomatoes under the current commodity system. In summary, 
to use the amount of tomatoes this particular district was allocated 
would have required them to serve one-half cup of fresh tomatoes 
to every child every day for a 2- week period. Since this was not ac- 
ceptable, they could not accept the tomatoes. 

A school district in Pennsylvania received a shipment of apples 
in 1994 which had no taste and most of which were discarded by 
students. If we want to improve the nutrition quality of school 
meals, we have to serve items students will eat. 

I would like to point out that the legislation on fruits and vegeta- 
bles is optional. Schools do not have to participate. In addition, the 
provision in H.R. 8 only allows schools to use 10 percent of the 14 
cents per meal in entitlement commodities to purchase fresh fruits 



and vegetables. Since approximately 20 percent of the 14 cents per 
meal is in the form of fruits and vegetables, this would only permit 
schools to use one-half of the normal amount for fresh, allowing for 
the receipt of additional fruits and vegetables in cans or in frozen 
form. 

Also, it would not be my intention that schools use a fresh fruit 
and vegetable CLOC to replace funds they are already spending on 
such commodities. Rather, the goal of the provision is to increase 
the amount of fresh fruits and vegetables in the school lunch pro- 
gram. This option would also be administered through the current 
State commodity distribution system. 

Finally, Mr. Chairman, H.R. 8 provides for a one-State CLOC 
demonstration to answer for once and for all the question of wheth- 
er or not CLOC can effectively remove commodities from the mar- 
ketplace at a rate comparable to the current commodity distribu- 
tion system. For years, we have heard, over and over again, this 
criticism that the project is not large enough to provide the Depart- 
ment with the definitive information as to the effectiveness of 
CLOC. Yet, that same kind of resistance that goes back to the year 
1492. The provision of H.R. 8 would only take effect if a State was 
able to obtain approval of 80 percent of local school food service au- 
thorities to undertake the demonstration project. It would be oper- 
ated by the commodity distribution entity within the State and 
would only be in effect for the authorization period of H.R. 8. 

Mr. Chairman, I understand the Department of Agriculture is 
opposed to any provisions dealing with the inclusion of cash/CLOC 
in H.R. 8. And I would be disappointed if they weren't because 
every one in the past has been opposed and every one in the future 
will be opposed. 

However, one of their arguments that their purchasing power is 
greater may not be legitimate in some instances. I have heard from 
school districts in some parts of the United States that while 
USDA may purchase commodities at lower prices, they end up cost- 
ing more once they have been processed into usable form — and 
often have higher fat content than commodities purchased directly 
from vendors. 

Examples provided by the Michigan School Food Service Associa- 
tion included breaded chicken nuggets, which were found to be 8 
grams higher in fat content when purchased through the commod- 
ity warehouse than through a vendor. And the Michigan School 
Food Service Association has found that breakfast egg biscuits and 
fruit pies cost more when purchased through the commodity ware- 
house than through a vendor. Breakfast egg biscuits cost 33 cents 
when purchased through the warehouse and 23 cents if they are 
purchased from a vendor. Fruit pies cost 19 cents each when pur- 
chased through a warehouse and 16 cents when purchased through 
a vendor. 

From Pennsylvania, I received the following examples: The end 
cost of chicken nuggets using USDA commodities was $1.83 per 
pound, while the cost from a vendor was $1.68 per pound. The cost 
of turkey roll using USDA commodities was $1.42 per pound, while 
the cost from a vendor was $1.37. The cost of wafer steak using 
USDA commodities was $2.05 per pound, while the cost from a 
vendor was $1.62 per pound. And finally the cost of hamburger pat- 



8 

ties was $1.90 per pound, while the cost from a vendor was $1.40. 
In times when schools are closely watching their budgets, this cer- 
tainly is another area which must be addressed in any commodity 
reform proposal, because we have to keep them in the national 
school lunch program. If they opt out, then, with the exception of 
a couple of States, you don't have to feed free and reduced priced 
meals, so the children get nothing at home and nothing at school. 

In conclusion, Mr. Chairman — I guess I can skip this part be- 
cause I was going to say there was a representative from the de- 
partment of agriculture of Pennsylvania that was going to testify, 
probably against, but I got a call from the Governor's office saying 
that he was not down here testifying for the department of agri- 
culture in Pennsylvania and they wanted to make sure that I un- 
derstood that. And I understand since, maybe, they pulled him. I 
hope it doesn't jeopardize his job in any way, shape, or form be- 
cause I had nothing to do with it whatsoever. 

As I indicated earlier, I want the system to help both school chil- 
dren and the agricultural community. However, as you can see, 
there are some problems that we have to work on. And I think the 
CLOC amendments that we have for you are good amendments. 

Let me just mention one comment from a school food service di- 
rector from the State of Washington. The question must be asked 
that if continued improvement is made by emulating the private 
sector distribution system, why duplicate the efforts via the public 
sector? Allowing local school districts the opportunity to participate 
in the CLOC program allows for faster, fresher, and local pur- 
chases to be made using existing channels of providing food to our 
children. 

In an era of increasing public scrutiny into the doings of our Fed- 
eral and State bureaucracies, this type of cost reduction would be 
well received. And I have two people here, Mr. Chairman, that if 
you want any input directly from those who are involved in the 
programs, I would like them to stand. 

If you have any questions that you would like to ask, they are 
responsible for some pretty large programs at the present time and 
are operating under the suggestions that Mr. Ford and I have 
made over the years. 

Thank you. I am sorry I took so long. 

[The prepared statement of Mr. Goodling appears at the conclu- 
sion of the hearing.] 

Mr. Stenholm. Thank you very much, Bill, for your testimony. 

I have just a few questions that I would like to ask you to kind 
of clarify in my own mind some points. 

I am never opposed to trying something new or different and 
when CLOC was tried in 1980 it was an experiment to see if we 
could do a better job of feeding kids, is the way I would put it. We 
have tried it. If it is working, then the natural supposition would 
be why not convert the entire program over to CLOC? If it is a de- 
sirable program, and it is the direction that we ought to go, why 
limit it to 29 or 26 schools? Why not all 15,000? That is a legiti- 
mate question I think to be asked. 

And then you have to start asking some other questions, and it 
is my understanding that the cost of administering CLOC in these 
demonstration projects is a little bit higher than the commodity 



distribution program. And it is also — and I want you to clarify this, 
because you stated in your testimony that in some cases the prod- 
ucts end up being more expensive through USDA purchasing pro- 
grams than where individuals are able to use the benefits of the 
CLOC or individual purchase. But it is my understanding that in 
the overwhelming majority of cases, USDA can buy products much 
cheaper and therefore it is true that in some instances it would be 
cheaper to do it in a manner that you have suggested and you be- 
lieve. But in most instances across the board for 15,000 schools, it 
would not be cheaper. 

For example, it seems to me in Pennsylvania, that if there was 
a bumper apple crop, that USDA could come in and benefit your 
apple producers by buying larger volumes than perhaps the school 
districts of the immediate area of the apple growers in Pennsylva- 
nia. I think that the record will show that that has been true. Com- 
ment on that, if you would, Bill. 

Mr. Goodling. Let me start with the first comment that you 
made. You have to keep in mind, and I am sure that you do, that 
change is painful. Change is painful for anybody. And as I indi- 
cated in my testimony, even though all of the school food service 
people would sit there — and Mr. Matz would be there with them 
to encourage them — and would complain, complain, complain, at 
the end, they would not want to change because they are fearful 
of change. 

They think, well, somehow or other if you are in the appropria- 
tion business you are going to cut us off and then we don't get any- 
thing. Then all of a sudden you had few commodities to send them 
and they realized maybe that was not a legitimate argument. 

Also, you have to understand that in the State of Pennsylvania 
at one time, for instance, the head of the school food service's hus- 
band was also running the commodity distribution program in 
Pennsylvania, and they both had a reason why they would want to 
continue the current system, I would think. 

Cost. You have to look at the end of this whole process when you 
talk about cost. If you send us in cheap fruit that is already spoiled 
or you send it at a time that we can't use it, there is a cost at- 
tached. We used to get turkey after turkey after turkey at the end 
of May. Great. We didn't have any freezer to freeze this stuff. We 
had to find and pay for a place to freeze it and then we had to 
bring it out and have it processed. So you have to look at the end 
of that line. You can't just say, well, we can purchase it in a mass 
purchase in Washington. However, look at the cost to the school 
district to send it out to be reprocessed, to have it stored, and the 
waste that is involved, and the amount that is thrown away. So 
when you look at the end picture, I think you get a different pic- 
ture. 

I mentioned many different products that they were able to pur- 
chase, just a sampling. Apples in Pennsylvania, I was glad you 
brought that up because that has changed I admit to the better. 
But, as a superintendent I also had to unload these commodities 
that came because, of course, the truck driver was union and they 
were not about to unload them. I was not about to call my mainte- 
nance staff from some school district in order to unload them. And 
so I would unload them and nothing made me more angry than un- 



10 

loading box after box of Washington State apples at the same time 
we had the largest apple producing area. We are No. 1, 2, and 4 
in the State of Pennsylvania in the 19th Congressional District. We 
can supply all the apples and all the peaches and all the cherries 
that anybody needs in Pennsylvania without the competition from 
Virginia and a few of the other States. 

So, I think just look at the cost at the end, not just at the cost 
of what they will give you, and say, well, we can purchase it for 
so-and-so. Is it used? Is it usable? Must you reprocess it? Must you 
store it? How much is thrown away at the end of that session? 

And again, let me just remind you that only 40-some percent of 
paying customers participate in the national school lunch program. 
That has to tell us something. And we don't want that to decrease. 
We want that to increase, because I always have to fight my side 
of the aisle every time this reauthorization comes because they 
want to cut out any reimbursement, quote, to the paying customer. 
Well, then you have destroyed the national school lunch program 
and you have no place to distribute — well, you do, you have senior 
citizen centers and so on. 

Mr. STENHOLM. I wish I would have had a superintendent like 
you when I was teaching vo-ag because, every time we had com- 
modities to unload, it became the ag teacher's responsibility, not 
the superintendent. 

Mr. Goodling. In my time, I couldn't afford the ag teachers. The 
poorly paid superintendent did it because it got unloaded at the su- 
perintendent's building. 

Mr. Stenholm. Just another observation, then I will recognize 
the others for questions. But to those that you mentioned are con- 
cerned about ending the appropriation, I think that is more than 
just a passing concern because it wasn't so long ago that we had 
revenue sharing and then it became apparent that we did not have 
revenue to share. 

And I think the school lunchroom personnel and others are very 
perceptive in their concerns about a permanent CLOC for all 
15,000 and what might happen versus a new and improved and 
even better commodity distribution program. I think that is a valid 
concern, one that can be debated on either side of it, but I think 
it is something that needs to be kept in the back of our minds. 

Mr. Goodling. Well, let me respond to that. I agree, and as I 
said in my testimony, I am not working toward 15,000 CLOC's. I 
am working for permanent now until we get the whole commodity 
distribution system set up in such a manner that there is no need 
and no necessity for these kind of programs. 

Mr. Stenholm. Mr. Gunderson. 

Mr. Gunderson. Thank you, Mr. Chairman. 

Mr. Goodling may have already answered this question, but on 
page 8 of your testimony, you say a school district in Pennsylvania 
received a shipment of apples which had no taste, then were dis- 
carded by the students. 

Do you know if those were Pennsylvania apples? 

Mr. Goodling. No, unfortunately the apples had been shipped 
in. It is better than it once was. They used to all come from Wash- 
ington State and places of that nature. They now do it a little clos- 



11 

er like Virginia and so on, but they, unfortunately, were not Good- 
ling apples, and 

Mr. Gunderson. They weren't Wisconsin apples either? 

Mr. GOODLING. They were tasteless. I will say, no, they weren't 
Wisconsin apples, just to kind of secure your support. 

Mr. Gunderson. We grow apples in my district, sir. We also 
produce cheese. 

Mr. Goodling. You also produce a lot of milk. 

Mr. Gunderson. The serious question I have is that you have 
two provisions, you have two major provisions in CLOC. One of 
those is the permanent extension of the CLOC sites as they exist 
today and the other is the statewide pilot project. I hear some peo- 
ple suggest that the compromise is that we agree to the permanent 
extension of the sites but that we do not do a statewide demonstra- 
tion. 

How would you respond to that proposal? 

Mr. Goodling. One of the major reasons for the statewide dem- 
onstration was to get beyond this argument that we always hear 
from the people who oppose it that we don't really have enough in- 
volved to really tell how well it works or doesn't work, and I 
thought this is one way during this 5-year period or whatever the 
reauthorization is to find out whether it can work on a statewide 
basis. 

Mr. Gunderson. Do you think a State like Pennsylvania would 
attempt that? 

Mr. Goodling. I would imagine that there are probably 80 per- 
cent in the State of Pennsylvania that would want to move in that 
direction. 

Mr. Gunderson. Thank you. 

Thank you, Mr. Chairman. 

Mr. Goodling. But I didn't put it in there to be self-serving. 

Mr. Gunderson. Do you believe that there is at least one State 
or more that would like to do a pilot project in this area? 

Mr. Goodling. I do believe, and I don't believe Marshall could 
convince them not to do it. 

Mr. Gunderson. He is on your right, second row back. 

Mr. Goodling. But he gets paid well, he can take it. 

Mr. Stenholm. Mr. Fair. 

Mr. Farr. Thank you, Mr. Chairman. 

I came in a little bit late and didn't hear all of the testimony, 
but one of the things that I was very interested in is whether any 
analysis has been done. Do we have any report on the cost of this 
program? If we are going to consider cutbacks or elimination of in- 
creases, do we really know what the lunch program is costing? 

We are appropriating a total of $5 billion in this arena — not the 
lunch program, but the CLOC program, and I am not sure, I have 
never seen any figures on what the percentage of the total amount 
we are talking about is. 

Mr. Goodling. To do the CLOC and the cash? 

Mr. Farr. Yes. 

Mr. Goodling. You are going to hear from the Department that 
it is more costly to do CLOC than it is to do their normal program. 
What I pointed out to the chairman is what you have to consider 
is the end product. Is it more costly if you consider the waste? Is 



12 

it more costly if you consider the reprocessing? Is it more costly if 
you consider the storage expense to the local district and to the 
State? 

You have to take all that into consideration or you really don't 
have a good answer to your question. But I think the testimony you 
will hear will be based simply on apples and oranges rather than 
the end product. 

Mr. Farr. I have been very supportive of the local school dis- 
tricts. I think what we are beginning to see, it has taken a long 
time, but if you look at what we are trying to do in welfare reform, 
in crime reform, we are looking at the totality of the family and 
the community and trying to instead of just serve those as tradi- 
tional categories where if you fit into a category, you qualify, trying 
to bring some real holistic approach to the environment which cre- 
ates these needs — nutrition, health care, safety in the community 
and so on. 

I think that the more flexible tools that you allow a local commu- 
nity to have, as long as they are communicating with other Federal 
entities, that we will really get to the heart of this solution rather 
than just trying to resolve the problem from a standpoint that we 
have excess commodities here that we have to distribute somehow. 

So I am very supportive of the ability for this local, sort of local 
control. It allows, I think, a greater flexibility and I think, in the 
long run, that flexibility is going to enhance problem solving. 

Mr. Goodling. That is, I think CLOC does both. It gives the De- 
partment the right to determine what it is and they do it locally, 
and I think that is what makes it a good program. 

Mr. Farr. I agree. 

Mr. Stenholm. We have 4 minutes to go vote, Mr. Goodling and 
Mr. Farr. So Bill, thank you very much. We appreciate your inter- 
est and dedication to this issue. 

Mr. Goodling. Thank you for the indulgence. 

Mr. Stenholm. We look forward to working with you. 

Mr. GOODLING. I think you understand I feel very strongly about 
this issue. 

Mr. Stenholm. I sort of gathered that, Bill. 

We call the next witness, the Honorable Ellen Haas, Assistant 
Secretary for Food and Consumer Services. 

STATEMENT OF ELLEN HAAS, ASSISTANT SECRETARY, FOOD 
AND CONSUMER SERVICES, U.S. DEPARTMENT OF AGRI- 
CULTURE, ACCOMPANIED BY KENNETH C. CLAYTON, ACT- 
ING DEPUTY ASSISTANT SECRETARY, MARKETING AND IN- 
SPECTION SERVICE; GEORGE A. BRALEY, ASSOCIATE ADMIN- 
ISTRATOR, FOOD AND NUTRITION SERVICE; AND VICKI J. 
HICKS, ASSISTANT DEPUTY ADMINISTRATOR, COMMODITY 
OPERATIONS, AGRICULTURAL STABHJZATION AND CON- 
SERVATION SERVICE 

Ms. Haas. Thank you very much, Mr. Chairman. If I can, I 
would like to summarize my statement and include it in the record. 

Mr. Sarpalius [assuming chair]. Without objection. 

Ms. Haas. We are delighted to be here today to discuss USDA's 
vision for the future of the Nation's school meal programs and how 



13 

the commodity programs play an important role in advancing our 
goals for healthy school meals. 

Just yesterday, the Department announced a comprehensive, in- 
tegrated four-point framework for action to fundamentally update 
and continuously improve our school meals. Central to this initia- 
tive is maintaining the integrity of the commodity program, while 
making needed improvements. Our school meals initiative has one 
simple goal: Healthy children. 

President Harry Truman established the national school lunch 
program back in 1946 in response to young men who wanted to be 
soldiers during World War II, but were not able to get in because 
they suffered from malnutrition. The program was defined then as 
"a measure of national security, to safeguard the health and well- 
being of the Nation's children and to encourage the domestic con- 
sumption of nutritious agricultural commodities." The mandate has 
not changed, but the science of nutrition has. Our programs have 
absolutely not kept up. 

With our school meals initiative for healthy children, we are up- 
dating the nutrition standards in our school meals program to meet 
health objectives. Our four-point program includes proposed regu- 
latory changes and departmental actions which Secretary Espy an- 
nounced yesterday. 

The first ingredient in our recipe for change is eating for health. 
The nutrition standards will be updated to include the dietary 
guidelines for Americans by the year 1998. However, it is impor- 
tant to note that schools will be able, once we have a final rule, 
to make those updates of nutrition standards to meet the dietary 
guidelines, and we expect the majority of the schools will do that. 

The second ingredient is: Making food choices. We will introduce 
new ways to appeal to children's taste and promote their health. 
If the food doesn't taste good, if it doesn't look good, kids aren't 
going to eat it. And it is not going to do them any good. So we need 
to embark on a major nutrition education initiative as well as 
training and technical assistance. 

Our third ingredient is: Maximizing resources. That means we 
need to marshal our available resources and strengthen partner- 
ships with State and local cooperators. This is the example we will 
use — the bounty of American agriculture — and we will improve the 
nutritional profile of commodities, working together with our part- 
ners in AMS and ASCS. 

The fourth component is: Managing for the future. We will re- 
duce paperwork burdens by using technology, streamlining admin- 
istrative procedures, and emphasizing flexibility. 

Hearing Congressman Fair a moment ago talking about inte- 
grated holistic approaches, that is exactly the kind of approach that 
we are taking in this initiative. We are using all of the components 
to get to our goal of healthy children. 

In the national school lunch program, federally donated commod- 
ities represent about 20 percent of the foods that are purchased. 
Every day in every school we serve across the country we are pro- 
viding commodities when we serve 25 million students in more 
than 92,000 schools. That is a cooperative effort between the pro- 
ducer, USDA, and school food authorities. 



82-893 0-94-2 



14 

As we change our school meals to promote the health of children, 
the integrity and continued improvement of our commodity pro- 
grams is central to achieving our goals. The Department, therefore, 
feels that the reauthorization or expansion of CLOC and the dem- 
onstration projects that have been ongoing is unnecessary at this 
time, not just because it costs less to maintain the commodity pro- 
gram, but most importantly because we are improving the commod- 
ity program in order for it to meet the health needs of children 
while supporting agriculture. 

Through our school meals initiative for healthy children, we have 
taken important steps to improve the commodities. I would like to 
share those with you. Working together with the agencies that I 
have talked about — the Agricultural Marketing Service and the Ag- 
ricultural Stabilization and Conservation Service — who are joining 
me here today, we have recently formed a commodity improvement 
council. 

The council will promote the health of schoolchildren by improv- 
ing the nutritional profile of USDA commodity offerings, while 
maintaining the Department's mandated support of domestic agri- 
cultural commodities and producers. The council will also enhance 
coordination among the three agencies within USDA responsible 
for obtaining and using these commodities. We are committed to a 
systematic, comprehensive review of current commodity product 
specifications. 

This is a time of continuous improvement, and it is important 
that we meet our dual objectives. Also, by encouraging regional and 
seasonal purchases, we will promote local agricultural production 
and forge new links with local farmers. 

And I am especially pleased to say that, as part of our new 
healthy meals initiative, we will be providing nutrition labeling on 
our commodities and institutional packages that go to schools. This 
information will provide needed tools for food service personnel as 
they plan more healthful menus. 

Beyond those specifics proposed in our School Meals Initiative for 
Healthy Children, the Department has already taken a whole se- 
ries of steps to improve the nutritional profile. For example, bulk 
ground beef is currently available with an average fat content of 
19 percent. That is compared with the commercially available prod- 
uct which averages about 30 percent fat. Ground beef patties with 
a fat content of 10 percent are also being offered to schools. 

As this committee knows, Mr. Chairman, last year the Depart- 
ment doubled the amount of fresh fruits and vegetables offered to 
schools along with increasing the variety available. Let me say that 
the children are loving that. 

Just today, I joined Secretary Shalala and Secretary Riley at a 
school here in Washington, DC, and when you ask the kids what 
their favorite food is after pizza, they will name you every fruit and 
vegetable that they want on the menu. And, there is a lot of enthu- 
siasm for the changes that we are making. 

Currently, the Department is testing low-fat mozzarella cheese 
with a 7 and 10 percent fat content as compared with a 20 and 25 
percent fat in regular mozzarella. That is going to make a big dif- 
ference in the pizzas that we are serving so that they are healthy 
pizzas with the lower fat cheese. Reduced fat salad dressing is an- 



15 

other example of how we are testing new ways of reducing the fat 
in our commodities, and preliminary results are being analyzed. 

Using the Department's purchasing power, we believe that we 
can encourage the market to develop new products that will pro- 
vide healthier food to schools. New products can be available soon- 
er, and potentially at lower cost to consumers because of the De- 
partment's buying power. 

In the letter that the chairman sent to the Department, it was 
requested that we explain our views on the commodity letter of 
credit provisions of H.R. 8. These provisions extend and greatly ex- 
pand the program. 

Because of the many improvements that we have made and are 
continuing to make in the commodities program and the commod- 
ities that are made available to schools, there is no reason to ex- 
tend the CLOC program. Indeed, it is important that we preserve 
the integrity of these commodity programs. I think it is important, 
too, to recognize that it is because of this continuous improvement 
of the commodities program that it is central to why we are oppos- 
ing the CLOC expansion. 

The CLOC pilot program began in response to complaints in the 
1970's that the commodity system was not keeping pace with the 
needs of the school lunch program. CLOC funds were diverted from 
the funds available under section 32. 

One of the primary goals of the 1949 act and section 32 commod- 
ity programs is to support the price of agricultural commodities by 
means of price support operations and removal of surplus commod- 
ities. The positive market effect of these commodity programs is 
most important to retain. The original CLOC evaluation dem- 
onstrated that the food value of the commodities offered by the De- 
partment was worth 2 to 3 cents more per meal than the food pur- 
chased locally with CLOC funds, in part because schools purchased 
more highly processed items with their CLOC vouchers. 

Also very important to the Department is the domestic origin of 
food purchases, a central guiding principle of these commodity pur- 
chase programs. When USD A supports the price of U.S. agricul- 
tural commodities under its price support and surplus removal op- 
erations, it acquires commodities directly from American producers 
and processors and can ensure that the end product is a domestic 
agricultural product. Both GAO and USDA found there is no assur- 
ance in the CLOC program. 

We have run the CLOC pilot projects for nearly 14 years in 25 
of the nearly 20,000 school districts in the United States. During 
that time, we have conducted two evaluations of the system, and 
the pilot programs have been extended six times through legisla- 
tive action. The Department has spent in excess of $8 million to ad- 
minister and evaluate the projects in that time. 

H.R. 8, which was recently reported by the House Committee on 
Education and Labor, provides for permanent reauthorization of 
the CLOC pilot/demonstration projects. We see no additional infor- 
mation being gained from the current pilot systems, and believe 
that extending them will continue the administrative costs borne 
by USDA to administer the projects without any additional benefits 
to our agricultural producers. 



16 

Second, H.R. 8, as reported, would add a statewide demonstra- 
tion project in a State where at least 80 percent of the school food 
authorities agree to participate. A statewide demonstration has not 
been attempted previously, but implications for State administra- 
tion have been addressed in previous studies. 

It is unlikely that a one-State study would be effective at yield- 
ing results that could be extrapolated for nationwide policy rec- 
ommendations. In addition, start-up and implementation costs 
would be considerable, and funding for these costs are not specifi- 
cally authorized by the bill. 

Finally, H.R. 8 allows all schools to use CLOC for 10 percent of 
their entitlement commodities for the purchase of fresh produce. 
This provision would allow for a nationwide optional CLOC system 
that would be a substantial disruption to the current administra- 
tion of the commodity programs, and it is not clear that the provi- 
sion would accomplish its goal. 

The amount of funds proposed to be set aside for new CLOC's 
amounts to about 2 percent of total food acquisitions. The most re- 
cent data on this topic indicates that fresh produce acquisitions 
amount to about 4 percent of all food served. If school food authori- 
ties are given such a letter of credit at the beginning of the school 
year to purchase any fresh fruit or vegetables, the letters of credit 
would likely displace local funds used to purchase fresh foods rath- 
er than increasing fresh offerings. 

The paperwork to administer such a system would be substan- 
tial. At the same time, a nationwide optional CLOC system would 
produce substantial disruption and administrative complications 
and paperwork. Dual systems of administration would be needed, 
but it would not be possible to determine with any certainty how 
much food the Department should buy, and how much would be 
purchased through CLOC. 

In conclusion, I believe that, through all our efforts, the Depart- 
ment is better suited than school systems to align the twin objec- 
tives of promoting nutrition and market stabilization. 

Finally, let me say that we now face a historic challenge to im- 
prove our school meals program. The Department under Secretary 
Espy's leadership is responding to that challenge with our School 
Meals Initiative for Healthy Children. As we make these changes, 
we must also take our commodity programs into the next century. 
By preserving the viability of our commodity programs, we have 
the opportunity to promote the health of children and simulta- 
neously benefit the American farmer. We are committed to doing 
both. 

I thank you very much, and would be happy to take your ques- 
tions. 

[The prepared statement of Ms. Haas appears at the conclusion 
of the hearing.] 

Mr. STENHOLM [resuming chair]. Thank you very much. 

Ellen, you have talked already to the additional cost to the tax- 
payer regarding a CLOC and a CLOC option, et cetera. I want to 
direct my questions to what the criticisms are. 

You heard Mr. Goodling talking about the fresh fruits arriving 
in an inedible fashion. When we hear the other testimony before 
this subcommittee, we will hear complaints that USDA-provided 



17 

cheese often stubbornly resists melting. It must be Wisconsin 
cheese. Members in Portland, Oregon, refuse USDA pasta outright 
because it is not of sufficient quality to be cooked and chilled. 
USDA often sends commodities which are inappropriate for school- 
children. 

In addition to the poor quality of many USDA commodities, some 
items are more expensive than similar items available locally. I 
know you are interested in increasing the amounts of fruits and 
vegetables in our diets, as we are. We keep hearing about the com- 
plaints about it. 

My question here is: Any suggestions as to how we can do a bet- 
ter job? 

Ms. Haas. Well, you are right, Mr. Chairman, we do share the 
objective of healthier children through meeting the dietary guide- 
lines, and by that, it means that we need to have kids eating more 
fresh fruits and vegetables. One of the mechanisms that we think 
is going to be very useful within the Department is to get the three 
agencies together to really deal with the commodity program and 
how we can improve it. 

There have been isolated criticisms, and I think we have acted 
on a lot of those criticisms in the past and are continuing to about 
the problems. We intend to stay on top of that because, if we keep 
the commodity program as a viable part of the changes that we are 
making, then we want to make sure that the product we are pro- 
viding to the schools is of the utmost quality, and I think that the 
changes that we are making in lowering the fat in cheeses and 
other dairy products and beef products and encouraging more fresh 
fruits and vegetables all go toward that end. 

Mr. Stenholm. I am going to insert a statement in the record 
from the National Cattlemen's Association highly supportive of the 
commodity distribution program and pointing out at this point in 
time, with low beef prices, this is an excellent time for USDA to 
be buying larger volumes of beef. This would be supportive of the 
cattle industry while at the same time providing the beef for the 
remainder of the school year or portions thereof. 

Through the commodity program, you can buy this when it is 
cheap which benefits all of the parties. We hear a lot of support 
for this program for that reason. But none of us want to provide 
commodities that are inedible. That doesn't make sense. I have 
shared this with you and I will share it for the record. 

[The prepared statement of Ms. Johnson appears at the conclu- 
sion of the hearing.] 

Mr. Stenholm. My local school superintendent here several 
years ago came to me and said, "We really appreciate the commod- 
ity program, we really appreciate the vegetable oils that you have 
been sending us, but you sent us so much, the only thing we could 
do with it was coat our parking lot." 

Well, these are the kind of horror stories that we have heard in 
the past, but we are doing a better job today, no question about 
that, and we must do an even better job. 

Ms. Haas. One of the problems, Congressman Stenholm, has 
been how many of the school food service personnel could be helped 
to learn how to use commodities in ways that taste good and ap- 



18 

peal to children. For that reason, central to our whole initiative is 
nutrition education training and technical assistance. 

We have encouraged farmers and chefs and others to come into 
the program so that we can find creative ways and creative recipes 
to use commodities in a way that children enjoy and their parents 
approve what they are eating. I think that this is all central to the 
changing vision we have for this program. I think we are trying to 
give it much more vitality and bringing it into the 21st century. 

Mr. Stenholm. No other questions at this time. 

Mr. Gunderson. 

Mr. Gunderson. Madam Secretary, I want a clarification. Did 
you call these people who make school lunches chefs? 

Ms. Haas. No, I did not. I said we are assisting food service per- 
sonnel and providing training in how to use commodities. 

Mr. Gunderson. You said bringing in the chefs. 

Ms. Haas. Bringing in chefs to help them. What we are doing, 
Congressman Gunderson, is trying to have a training program so 
that we can help schools provide healthier menus and food that 
tastes good and looks good. We are bringing in chefs to help in that 
undertaking. 

Mr. Gunderson. The reason I brought that up is my ongoing ar- 
gument that we are so concerned about what goes into these school 
lunches that we forget the fact that 55 percent of our students 
today don't participate in the school lunch program, and I don't 
hear anybody ever complaining about that fact. 

That bothers me greatly because, until we get meals that kids 
like to eat, it doesn't matter how good, quote, unquote, the meal 
is health wise, if they decide to consume a doughnut and a can of 
Coke instead. 

Ms. Haas. I couldn't agree with you more. 

Mr. Gunderson. But we need some help on that because you 
should make that point No. 1 of your four points. 

Ms. Haas. Well, it is No. 2. If food doesn't taste good and look 
good, kids aren't going to eat it. So taste is an important compo- 
nent of our whole initiative as well as nutrition education which 
really is combining all of these messages to kids in a way that they 
understand. 

Mr. Gunderson. What if we had a dual agenda, one which was, 
quote, unquote, to improve the health status of the school lunch 
but, second, to increase participation by 5 percent a year? 

Ms. Haas. That is the goal. 

Mr. Gunderson. I have never seen it anywhere. 

Ms. HAAS. Well, you are hearing it from me today. 

Mr. Gunderson. Good. I have another question. 

About 2 weeks ago, I wrote the Secretary. As you know, we have 
experienced in the last 2 months the third largest drop in milk 
prices in history, and one of the steps we were able to take under 
then-Secretary Madigan when this occurred in 1980 was that the 
Department of Agriculture agreed to make advance purchases of 
the dairy commodities for the upcoming school year. It would be ex- 
tremely helpful to the dairy industry if we could get a similar com- 
mitment and action from this administration. 

Do you have any idea what the status of that request is? 



19 

Ms. Haas. It is under review, and certainly we understand the 
situation both in dairy prices and beef prices, and we are looking 
at those purchases very closely. 

Mr. Gunderson. When do you think we can anticipate a re- 
sponse? 

Ms. Haas. We will try and be as prompt as we possibly can. 

Mr. Gunderson. Like tomorrow? Next week? 

Ms. Haas. It is under review and certainly we understand the 
sensitivity of timing. 

Mr. Gunderson. I would encourage you strongly, as soon as pos- 
sible, to get us some help on that, very frankly. 

Ms. Haas. Sure. 

Mr. Gunderson. Let me focus on the dietary guidelines that are 
announced. The first question in reference to the dietary guidelines 
is whether or not USDA will eliminate the meal pattern that re- 
quires schools to offer children a serving of meat, two servings of 
fruits or vegetables and one serving of bread and milk. 

Ms. Haas. As parts of our initiative in the proposed regulations 
that will be published in the Federal Register tomorrow, we are re- 
placing the current meal pattern which has been very rigid and 
very restrictive and had problems for certain foods like yogurt 
which didn't fit anywhere in the meal pattern, replacing that with 
a new menu system and an assisted menu system that would give 
us the kind of flexibility for schools to meet the dietary guidelines. 
It is easy to use, it is easy to understand, and it is something that 
is going to help all of us make the changes that we need for 
healthier children. 

Mr. Gunderson. Have you any analysis at this point in time of 
what the impact of the new meal plan or dietary guidelines will be 
on various commodities such as meat, such as cheese, et cetera? 

Ms. Haas. As a part of the overall commercial market, the school 
lunch program represents an infinitesimal part. It is not to say it 
is not important. It is about 1 or 2 percent for both dairy and beef 
products of the overall commercial market. That in itself is impor- 
tant. 

If we were to make the changes to meet the dietary guidelines, 
you have to recognize that the schools would then have the flexibil- 
ity. We are not going to mandate what kind of meal they have in 
that school on a given day, so the schools have great variety. 

When you were voting, I mentioned the example of pizza. You 
could serve pizza with cheese on one day that is quite high in fat 
and another day you might have skim mozzarella cheese, and that 
would meet the dietary guidelines. You would still be using cheese 
and you would still be meeting the dietary guidelines. 

So the price differential there in any kind of economic impact 
would have a range. It could be zero, and this was in our impact 
statement that was done for the proposed rule. It could be any- 
where from zero to about 7 cents per hundredweight for dairy. 

Mr. Gunderson. We could have a 70 cent per hundredweight? 

Ms. Haas. Seven. 

Mr. Gunderson. A 7 cent per hundredweight decrease? 

Ms. Haas. It could if it was very extreme. The point is most like- 
ly the market has already responded because the market is provid- 



20 

ing low fat products, so there should be minimal if any kind of 
price impact. 

Mr. Gunderson. Will we be required or will it be necessary for 
us to get a CBO cost estimate of what the impact of these regula- 
tions would be? Here is why I ask the question because, as you re- 
call, over in Education and Labor when we were discussing the 
food-milk components, the reasons that the advocates could not 
have an overall elimination of whole milk is it would have cost the 
program $100 million and they couldn't come up with $100 million 
to pay for that. 

If we were to provide CBO with your new dietary guidelines or 
the regulations tomorrow and they were to look at that, what is 
your estimate of what they would project would be the cost of the 
school lunch program on, say, the meat, cheese, dairy products, et 
cetera? 

Ms. Haas. The important thing is that there is such a range be- 
cause, as we were talking earlier when you were talking about 
taste, preparation is also very important. If you are reducing fat, 
if you move away from deep fat frying and you move to roasting, 
you are cutting a lot of the fat, so there is no displacement. 

The regulations currently don't require a regulatory change, 
don't require a CBO analysis, but the careful analysis that we did 
as the impact statement behind it showed that there would be very 
minimal impact at all on price or displacement. 

Mr. Gunderson. I understand you don't have to get a CBO anal- 
ysis to move regulation. 

Ms. Haas. Right. 

Mr. Gunderson. I am asking the question, if we take those regu- 
lations and ask CBO to recalculate the baseline accordingly, what 
is the impact of those regulations on the overall cost of the school 
lunch program? 

Ms. Haas. That was also done in the analysis of the prepared 
rule, and there was no cost increase in the school lunch program. 

Mr. Braley. Mr. Gunderson, we compared the meals that are 
currently served, typical school lunches that are served now and 
made minimal modifications to those menus to make them meet 
the dietary guidelines and to see what the impact would be on food 
costs. 

The analysis we did indicated that menus which would look very 
similar to ones today could be served in the future to meet the die- 
tary guidelines and not increase the cost, the food cost to local food 
service operators. The other thing we didn't do is an in-depth anal- 
ysis beyond food costs, but the labor costs and other costs didn't ap- 
pear to be shifted by this change either. So we were comfortable 
that the new menus can be served within the current reimburse- 
ment scheme. 

Mr. Gunderson. I don't know that we are communicating here. 
In the sense that the reality of eliminating the whole milk was not 
that you increased the cost of school lunch, for example. The reality 
of eliminating the whole milk provision would have been that the 
cost of the dairy program would have gone up $100 million, and 
under the PAYGO requirements of the budget, we then would have 
had to come up with the money elsewhere to pay for that. That is 
my question. 



21 

Under your new dietary guidelines, is there a projected impact 
on other commodity programs that we are going to have to come 
up with the money for? 

Ms. Haas. No. Also, I would like to go back to the point because 
you and I have had this discussion before about the whole milk re- 
quirement that really, in going to a new menu system, in taking 
a nutrient approach, we are getting away from the good food/bad 
food approach that has been in the past. We are also going to a va- 
riety of foods so that you are not singling out any food as having 
any kind of inherent problems. 

So I think that this move is consistent with the approach that 
you have also talked about in the past and one where we could 
reach the dual objectives without any increased financial exposure 
to any of the affected interests. 

Mr. Gunderson. I think of my home school district, a smalltown 
farm district where, frankly, I have to tell you, those farm boys 
drink a lot of whole milk. Let's assume that that school lunch pro- 
gram has a regular amount of calories from fat that meet your 
guidelines but every young boy in high school who goes through 
takes two cartons of whole milk. 

Now, are they in violation of your new guidelines? 

Ms. Haas. No. If that is a school district in Wisconsin, in north- 
west Wisconsin, that milk is important and whole milk is very pop- 
ular. They probably have the ability, then, to adjust that menu to 
reduce the fat in other places, so in other words — or add the fiber 
in other places. 

They would not be in violation because the bottom 

Mr. Gunderson. What if the dietician creates an overall menu 
in the attempt to meet your guidelines on the assumption that the 
average student will, say, have 1 percent chocolate milk, yet in the 
process of actually eating that school lunch, most of the guys on the 
high school football team go and take two or three cartons of whole 
milk. 

Now, the dietician at the school, the cooks had nothing to do with 
that, they developed a menu that met your guidelines. However, in 
reality, all of those kids had obviously a much higher fat content 
in milk. Is that school in violation? Would they have to make other 
adjustments in their school lunch in order to comply with normal 
habitual use of whole milk? 

Ms. Haas. Well, the bottom line is what counts. It is the average 
of milk that is actually consumed, so what we are looking at in 
compliance of this program are the production records, the records 
of food that is used, and the actual consumption. It is done over 
1 week. It is not just done over a day, so it is compliance of dietary 
guidelines over 1 week as well. 

So your example is difficult because it is out of context of what 
else is being eaten by those children in that school, and what is so 
important is the bottom line. The responsibility of the school would 
be to have food over 1 week that meets 30 percent of calories from 
fat, 10 percent from saturated fat, and you take the average of the 
food that is actually consumed by children. 

Mr. Gunderson. Let me look at the regulation, because I think 
we have an intent that I think is acceptable. We may have an im- 
pact that you find unacceptable that may be an impact created to- 



22 

tally by the choice of the student. I have to tell you, if this turns 
more kids off to school lunch, then we have a problem. 

Ms. Haas. No, I think the opposite is what is going to happen. 
Two things: One, I would be happy to sit down with you — we have 
a 90-day comment period — and come in and work it all the way 
through because the intent is the same. That is why we have this 
long comment period, but I would be happy to do that with you. 

I don't think that you get into that position. I see the changes 
that we are making as an opportunity of expanding the market, of 
expanding participation because having such a small percentage of 
children today participating shows that the program needed to be 
improved, and that is what we are doing. And part of the reason 
is we need to improve the health of the program and the taste, and 
all of those things so that kids enjoy it. 

Mr. GUNDERSON. One final question. I have used way beyond the 
time. Would you seek to have the CLOC provisions in H.R. 8 re- 
moved in the Senate? 

Ms. Haas. Whether we are seeking it is a difficult word, Con- 
gressman Gunderson. We have a position today where we are op- 
posed, and I see no reason for that position to change. 

Mr. Gunderson. I was just trying to detect the temperature of 
that opposition because I am one of the few Members who are on 
both Education and Labor and Ag. I am trying to save my life in 
both committees. 

Ms. Haas. I didn't help you very much, did I? 

Mr. Gunderson. No. Thank you. 

Mr. Sarpalius [assuming chair]. Ellen, let me ask a couple of 
questions. We have had several discussions about new technologies 
that are available and also places that are located across country. 
I have invited you to one in my district where they can freeze dry 
fresh food and have the ability to store fresh vegetables for long pe- 
riods of time in processing and in large packages that are available 
for large meals for schools. 

Ms. Haas. Right. 

Mr. SARPALIUS. Can you bring me up to date on where we are 
on that. 

Ms. Haas. I wish I could do that better, and I do want to come 
down to visit the food bank and the different experiences that we 
talked about. I am not aware of what kind of improvements on the 
technology that we have made in this program, so I would like to 
get back to you about that, if I may. 

Mr. Sarpalius. I really see this as a great opportunity to provide 
good nutritional meals, not only to school districts, and the tech- 
nology is there and the capability is there. For an example, in this 
one particular facility that can provide enough meals they claim for 
about 70 percent of the people that are on food stamps, and instead 
of providing stamps, providing balanced meals. 

Ms. Haas. I think that there have been tremendous advances in 
food technology that really should help us, and part of the prin- 
ciples in our healthy meals initiative is to use that technology to 
make it work for the program. So I would like to explore further 
and come visit maybe sometime this summer. 



23 

Mr. SARPALIUS. We would love to have you. I think you will real- 
ly be impressed, and I can really see an opportunity there for 
school districts. 

Another question. What is being done to, I guess you could say, 
remove candy machines and things like that in schools to encour- 
age kids to eat their lunches before they eat a candy bar? 

Ms. HAAS. Right. That issue is one that has a history to it. Back 
in the late seventies, the Department of Agriculture tried to pro- 
hibit the use of vending machines in schools. The Department was 
sued and lost. The decision said that the Department did not have 
the authority except during the lunch hour and in the cafeteria. 

As you know or probably know, in the Senate bill on Child Nutri- 
tion Reauthorization, there are provisions that basically clarify that 
existing authority, and Senator Leahy has been very outspoken 
about the problems that are incurred because of those vending ma- 
chines. 

I do believe, though, with the changes that we are making and 
the emphasis on taste and the healthy meals that will be available 
in school, that there is going to be a whole lot less interest in those 
vending machines. 

Mr. Sarpalius. That was the next question I was going to ask. 
Your second goal in here is to — it says we will introduce new ways 
to appeal to children's taste. How do you appeal to children's taste 
from a meal versus a candy bar? 

Ms. Haas. You can create a motivational approach. For example, 
we are going to undertake a nutrition education campaign where 
kids working in their classrooms learn about the relationship of 
diet and health and how foods taste. Some schools are even having 
tasting clubs now. 

I have visited schools and talked with kids and asked them about 
fresh fruits and vegetables. Carrot sticks and celery sticks are all 
fun things for the little ones to eat. I think what you need to do 
is to have that kind of nutrition education effort that uses media — 
doesn't just do it through a paper brochure and teachers preaching 
to kids — but it makes it fun. We are also trying to provide food to 
children in a way that really looks appealing as well. 

And that is why we are doing the training and technical assist- 
ance to help us get there. It is a hard job to do, but we are rolling 
up our sleeves and doing it. 

Mr. Sarpalius. At one time, you and I had a discussion where 
you said that you were looking at some type of incentives to en- 
courage schools to have their own school gardens to teach kids ei- 
ther growing their own tomatoes or lettuce or whatever, carrots to 
try to, one, teach them the value of agriculture and also having 
fresh food for the school. 

Where are you at on that? 

Ms. Haas. Well, we are progressing slowly. Now that we have 
the initiative announced, we are going to be expanding our efforts 
in that area. I was in a school in the inner city of Chicago in 
Cabrini-Green, and the principal did have a little garden where the 
children were learning how food grows. 

Many of those kids had really never been out to see a farm, 
never knew about where food came from. That is the way, starting 
from the seed, that children can learn about food, learn about its 



24 

relationship to their health. I believe it really helps their self-es- 
teem as well. So that is the kind of initiatives that we are going 
to be undertaking with our nutrition education effort. 

Thank you. 

Mr. Stenholm [resuming chair]. A couple of final questions. In 
your testimony you stated that commodities donated to schools rep- 
resent almost 20 percent of all of the food purchased by schools, yet 
Congressional Research Service has determined of the total school 
lunch support, commodities have fallen from 19.3 percent in 1980 
to 12.2 percent in 1993. Cash support has increased by 74 percent, 
commodities by 0.1 percent. 

Can you explain the discrepancies between your 20 percent and 
the CRS's 12.2 percent? 

Ms. Haas. Everything that I have seen indicates somewhere be- 
tween 17 and 20 percent. So I don't know where CRS got its num- 
bers, but I would be happy to go back and check and find out why 
that inconsistency. 

Mr. Stenholm. I would like very much for you to do that. We 
will give you the CRS numbers and we would like for the two of 
you to resolve your differences. 

Ms. Haas. Sure, be happy to do that. 

[The information follows:] 



25 



Response to Mr. Stenholm's question on discrepancies between 
CRS's and USDA's figures for the percent of food purchased by 
schools which Federal commodities donations represent: 

CRS's 12.2 percent figure is the ratio of the dollar value 
of commodities donated to schools compared to the total 
Federal cash payments to schools through the National School 
Lunch and School Breakfast Programs. 

The figure of 20 percent that USDA has been using describes 
a different relationship; it represents the proportion of 
total school food acquisitions that is supplied to schools 
by USDA in the form of entitlement or bonus commodities. 
The two figures are not comparable because the USDA analysis 
only considers food costs. Not all cash payments are used 
for local school food purchases. It is important to note 
that USDA cash subsidies are not intended solely to offset 
food costs but also other costs associated with preparing 
meals: labor, supplies and overhead, etc. 



26 

Mr. Stenholm. I know I don't need to urge you to improve the 
nutritional value of the school lunches. 

Ms. Haas. You are right. 

Mr. Stenholm. But I do want to urge you to spend some time 
on looking on how to improve the distribution of the commodities 
because, if we overemphasize the nutritional side and 
underemphasize the things that are important to producers and to 
the preparers of our school lunches, we are going to miss the big 
target. 

And I know you know that, but we have to improve the aspects 
of the commodity distribution program or we are going to lose it, 
and I sincerely urge the folks that believe that CLOC and cash dis- 
tribution are the best way to go to look at the whole picture, not 
just the short-term picture which you have in your testimony indi- 
cated support for that, and we have heard others — we will hear 
from others today that will be doing the same thing. 

I put the letter of the National Cattlemen into the record. Steve 
mentioned the dairy side of it. There are golden opportunities to 
utilize taxpayer moneys to buy foods for all people cheaper at dif- 
ferent times, and that is what the commodity program is all about. 
It is a way for a win-win. 

And many times in the past, we have seen that we wait too long 
for some reasons, and I hope that you will spend some time in the 
next few days looking at purchasing, using the best judgments of 
your department on when to purchase and how much and looking 
ahead just as Mr. Gunderson mentioned to you on the dairy and 
I mentioned to you in the area of beef. 

There are some golden buy opportunities if you are buying. That 
is what the commodity program is all about. 

We also, and I submit for the record immediately prior to the Na- 
tional Cattlemen's Association, the testimony of the American As- 
sociation of Classified School Employees who have several ques- 
tions about the commodity program. I mentioned just a few of the 
questions, but I would like for you to respond in writing for the 
record and to the subcommittee to the valid questions that they ask 
concerning the manner in which the foods are distributed. 

They have some very valid concerns and I know we both agree 
that there can be some improvements and I know you are working 
on it, but perhaps there are some areas that we have missed thus 
far, so we will submit those to you so that you might respond to 
these people — at least one-third of this group are associated with 
school food services. These are the people that I particularly want 
to listen to when it comes time for school lunches and lunchroom 
and commodities and nutrition programs, et cetera. 

So with that, I have no further questions for you today. We ap- 
preciate your testimony and appreciate the cooperative way in 
which we have been able to work together. Look forward to it in 
the future. 

Ms. Haas. Thank you very much. 

[The information follows:] 



27 

'"M 2 7 1994 



Honorable Charles Stenholm 

Chairman 

House Agriculture Subcommittee 

on Department Operations and Nutrition 
U.S. House of Representatives 
1211 Longworth House Office Building 
Washington, D.C. 20515-4317 

Dear Mr. Chairman: 

Per your request, the Department is submitting the enclosed 
response to various issues raised by the American Association of 
Classified School Employees concerning the National School Lunch 
commodity distribution program. The Association presented these 
issues in written testimony submitted to your subcommittee during 
the June 9, 1994, hearing on cash and commodity letter of credit 
alternatives to the commodity program. A copy of the testimony 
is included with our response for reference. 

For your information, the Administrator of the Food and 
Nutrition Service, Mr. William Ludwig, recently met with the 
leadership of the Association and reviewed many of the same 
concerns outlined in their testimony. At that meeting, as well 
as in their testimony, the Association noted that its membership 
generally supports the commodity program. Their concerns related 
to efforts to distribute fresh produce through the commodity 
program, and, to a lesser extent, the logistics of the actual 
delivery of products to schools. 

We would point out that many of the Association's concerns 
are the result of generally isolated events and are not, by and 
large, indicative of the commodity program as a whole. Any 
enterprise, public or private, that purchases and distributes 
more than $700 million worth of product to more than 92,000 
schools nationwide and processes thousands of delivery orders 
annually will inevitably experience occasional problems. We 
continue to learn from these incidents, though, and are committed 
to total customer satisfaction. We continue to improve our 
program in response to concerns like those raised by the 
Association, and are aggressively exploring ways to reduce even 
further the number of problems schools occasionally encounter. 

The Department firmly believes that our commodity program 
provides exceptional value to schools at a time when schools 
everywhere are experiencing significant budgetary pressures. We 
are also proud of the strong link the commodity program forges 
between the American farmer and important school nutrition 
programs. 



28 



Honorable Charles Stenholm 

If you have any questions about our response to the 
Association's specific concerns, please do not hesitate to 
contact me at your earliest convenience. 



Sincerely, 




Assistant Secretary for 

Food and Consumer Services 



Enclosures 



cc: Eugene Moos, Under Secretary 

Patricia Jensen, Acting Asst. Secretary 
Bill Ludwig 

USDA:FNS:SNP:RON VOGEL:kjj : 305-2054 : 6/16/94 
DOC: J: STENHOLM. RV 



29 



The following is a response prepared by the Food and Nutrition 
Service (FNS) to the Testimony of the American Association of 
Classified School Employees Before the House Agriculture 
Subcommittee on Department Operations and Nutrition, June 9, 
1994. 

USDA Allotments Are Often of Questionable Quality 

o A School food service professional from Cuter-Orosi Unified, 
California, reports that a DSDA shipment of green beans 
arrived damaged and contained maggots. 

USDA did not receive a complaint from the Cuter-Orosi 
Unified School District alleging that maggots were found in 
green beans. However, USDA was recently informed by another 
school district in California that maggots were found in 
several damaged cases of green beans. FNS was not advised 
of this situation until several months after the incident 
allegedly happened. This claim was investigated by FNS and 
the Agricultural Marketing Service and the allegation 
concerning maggots was not substantiated. The green beans 
were replaced. It is very rare, if not unusual, for USDA to 
receive complaints of this nature. Continuous modifications 
and improvements are made in the complaint system to help 
ensure that all complaints are provided to USDA in a timely 
manner. 

o USDA-provided cheese often stubbornly resists melting. 
Occasionally, the Cheddar cheese is pink. 

In School Year (SY) 1994, USDA received several complaints 
on the meltability of process cheese. USDA quickly 
investigated the problem and learned that the problem 
occurred because the vendors had not met the meltability 
requirements required in this product's specifications. As 
a result, the vendors replaced the process cheese. In SY 
1994, USDA received two complaints on the meltability of 
cheddar cheese. USDA advised the recipients that cheddar 
cheese generally melts rather poorly and is used in cooking 
for flavor and process cheese should be ordered when cheese 
is needed for cooking that requires cheese to melt easily. 
We have not received any complaints on cheddar cheese being 
pink. In SY 1994, USDA distributed over 53.9 million pounds 
of process, cheddar and mozzarella cheeses to schools at a 
value of over $70.6 million and only 11 complaints were 
received on these three products from schools. 



82-893 0-94-3 



30 



Members in Portland, Oregon, refuse USDA pasta outright 
because it is not of sufficient quality to be cooked and 
chilled. Another member in California reports that their 
spaghetti dissolves into mush when boiled. 

Several years ago, problems were reported with the texture 
of the spaghetti after cooking. The problem was found to be 
that durum flour was used in some of the products. 
Specifications were changed to require the use of semolina 
flour. Since this time the number of complaints USDA has 
received on spaghetti and other pasta products have been 
very few. Problems reported on texture have been found to 
be the result of over cooking. 

Poorly processed produce causes difficulties. Tibard, 
Oregon, received 7 5 cases of tomatoes not sorted by 
ripeness. In addition, no information was provided to 
properly ripen these tomatoes. About 15% of the order, 
which was huge to begin with, eventually spoiled. A 
district in California received blueberries which still had 
stems, causing a scramble to clean the fruit so that it 
could be used in muffins. 

Several members reported that overripe fruit arrives which, 
while actually fine inside, appears so shrivelled that 
children will not eat the produce. 

Offering perishable product is a challenge whether it is 
purchased by USDA or in the commercial market, and problems 
do occur. However, States in consultation with schools make 
the decision on quantities to order. USDA disseminates 
information, such as fact sheets and specifications to 
schools via States. This guidance includes information on 
the proper handling, storage, and distribution of fresh 
products in a timely manner. 

All of the foods USDA makes available are inspected for 
quality and wholesomeness prior to being distributed to 
State agencies. Unfortunately, in a few instances foods, 
such as the blueberries, arrive at their destination in an 
unacceptable condition. In instances in which the condition 
of a product is questionable, immediate action is taken to 
address the problem. Procedures have been established to 
replace products that arrive in an unacceptable condition. 
USDA did not receive any blueberry complaints from the State 
of California in SY 1994. Several fresh orange complaints 
were received. Most of the complaints received on fresh 
oranges were from States (California, Arizona, Texas) which 
required fumigation. This resulted in the fresh oranges 
remaining on the truck for an additional period of time 
which contributed to the spotted and shriveled outside 



31 



appearance of the fruit. In other cases, where vendor 
liability was determined the product was replaced by the 
vendor. 

USDA often sends commodities which are inappropriate for 
school children. Oregon received cases of canned salmon, 
not a popular item among grade-schoolers and teenagers, and 
other districts have received so much figs, almonds, and 
dates that it took years to use them. 

Much emphasis is placed on purchasing products most desired 
by schools and that will be acceptable to children. School 
districts inform their State Distributing Agencies (DAs) on 
the commodities they would prefer and those which are most 
acceptable to children. State DAs, in turn, make this 
information available to USDA which is used to assist with 
determining the products to purchase. Canned salmon, figs, 
almonds and date pieces have been provided to States as 
bonus products. Bonus products are provided to schools over 
and above the amounts that USDA is required to give schools 
in their entitlement. It is strictly States' and schools' 
option whether to accept bonus products'. Also, States and 
schools determine the quantities they can use without waste. 
However, it should be noted that the acceptability of some 
foods is a result of local and regional preferences. While 
all parts of the country may not find the foods mentioned 
desirable, we have received a number of letters in support 
of these very same foods. In the final analysis, States and 
schools do not have to accept bonus products if they don't 
desire them or cannot use them. 

In addition to the poor quality of many USDA commodities, 
some items are more expensive than similar items available 
locally. Lansing, Michigan, School District notes that 
vendors can beat USDA's price in items such as breakfast egg 
biscuits, fruit pies, and tortilla chips and match the price 
on chicken nuggets. In the example from Lansing, USDA's 
chicken nuggets have almost twice the fat of nuggets 
provided through vendors. 

USDA does not offer and make available breakfast egg 
biscuits, fruit pies, and tortilla chips to schools under 
the National School Lunch Program. We understand that 
Lansing, Michigan purchases these products through a State 
processing contract. USDA provides a low fat, low skin, all 
meat chicken nugget to schools which is superior to most 
commercially available nuggets (no non-meat fillers, added 
water, etc. ) . 



32 



o Northview Public Schools, of Grand Rapids, Michigan, could 
only use about 63% of its allocated commodity food dollars 
this year. Northview' s Food Service Director explained that 
fruit and vegetables "often (arrive) in an unusable state." 
The Food Service Director for Bay City Public Schools, Bay 
City, Michigan, noted that this district's actual use of its 
budgeted entitlement has been steadily declining since 1988 
and currently stands at less than half of this year's 
$131,428 budgeted entitlement. 

Currently, USDA offers over 8 5 commodities to schools. 
Hence, USDA provides a healthy array of commodities to 
schools and offers acceptable variety of commodities with a 
reduced amount of fat, salt and sugar. Additionally, USDA 
continues to incorporate new products as improvements are 
made in these areas. As products are considered, they are 
evaluated for user acceptability. Changes and improvements 
in products offered include: 

o Increasing the quantity of fresh products purchased. 

o Expanding the variety of poultry products, including 
frozen ground turkey and turkey burgers with an average 
fat content of 11 percent. 

o Increasing the variety of whole grain products. 

o Offering reduced-fat cheddar cheese. 

o Lowering the fat in our beef and pork products. 

We understand from the Midwest Regional Office that 
Northview Public Schools and Bay City Public Schools have 
used 83 and 67 percent respectively of their SY 1994 
entitlement. These percentages will increase when final 
tabulations have been made. Most schools nationwide use all 
of their entitlement. 

The Current System Needs More Flexibility 

o An order of tomatoes was delivered to the Marysville, 

California School District during Spring Break; no one was 
there to handle the order. 

States were informed of the various shipping periods when 
bonus tomatoes could be delivered, and they selected the 
shipping period when the product was to be delivered to the 
school district. Additionally, as required in the contract, 



33 



vendors must notify the State prior to delivering tomatoes 
or any product. If vendors are early or late with 
deliveries, states can refuse to accept the product. In 
most instances products are delivered on time without 
problems. 

In Portland, Oregon, a huge order of tomatoes was received 
that food service workers could not possibly hope to use 
before the produce rotted. 

States and schools make the decisions on the quantities of 
each product to order and have options regarding delivery 
periods. One offering of tomatoes included four weekly 
offerings between March 30 and April 23, 1994; another 
offering included the 4 weeks between May 14 through June 
10, 1994. In addition, if a full truck load of tomatoes is 
too large for one school district, States can elect to split 
the truck and have the product dropped at several sites. 
Again, in many cases tomatoes are a bonus product, and 
States and schools share the responsibility to order the 
quantity they can use. 

Portland is also receiving a "disproportionate" amount of a 
single commodity as its offered product: butter. This does 
not make any sense when trying to reduce the amount of fat 
in school meals. 

Butter is made available as a bonus commodity upon request 
by schools. These bonus commodities (extra foods) are 
offered to schools above and beyond their entitlement, and 
the decisions whether to order and in what quantities are 
left strictly to States and schools. 

DSDA "ships at their convenience" in the words of one 
member, and it is often difficult to plan meals around 
unknown foodstuffs arriving at an unknown time. 

States are apprised of the various shipping periods when 
each product can be delivered, and States select their 
desired shipping period. Occasionally, market availability 
and weather conditions do affect a delivery date. However, 
a notice of delivery document is provided to States prior to 
the product arriving. This document provides pertinent 
information on the product that will be delivered including 
the shipping period. 



34 



o Deliveries have been regularly left at curbside. USDA 
personnel have sometimes failed to notify recipients, 
resulting in a delivery which arrives when school workers 
have already gone home. The food is thus left overnight. 

Trucking firms used by USDA must obtain a signed receipt to 
receive payment for delivering the product. Most deliveries 
to schools are made by the State Agency rather than USDA. 
USDA normally ships products directly to State warehouses. 
In any case, the Department is unaware of any situation in 
any State in which deliveries are regularly left at 
curbside. 

o A member from California told us that the standard shipment 
size (1,000-1,500 cases) is too large to process in a timely 
manner. 

All USDA products are shipped to States in truck load 
quantities. However, if a truck load is too large for one 
school district, States can elect to split the truck and 
have the product dropped off at several sites. 

CLOC is Clearly a success 

o CLOC pilot programs have been in operation for nearly 14 
years and has been extended six times through legislative 
action. The Department has conducted two evaluations of the 
demonstration and spent over $8 million to administer and 
evaluate the projects. 

The initial evaluation concluded that CLOCs provided 
flexibility to food service operations, but that this 
resulted in the purchase of more highly processed products 
and a reduced level of support for some commodities. More 
processed commodities included chicken, turkey and vegetable 
products. If implemented nationwide the report concluded 
that there would be farm level reductions in beef (0.3 
percent), chicken (0.2 percent), pears (2.4 percent) and 
sweet potatoes (1.4 percent). Increased use was projected 
for field corn (0.1 percent) and palm, cottonseed and 
cassava (for oil; no percents given). 

The second evaluation of a modified CLOC program was 
narrowly focused on market removal, timing of purchases, and 
domestic origin of purchased products. While it found that 
a number of the market removal and timing issues had 
improved, questions remained about the ability of CLOCs to 
obtain an equivalent market impact to direct donations. It 
also found that CLOC cannot ensure purchases of domestic 
origin, which is major concern to the Department in a 
program that is designed to provide support to buy domestic 
agricultural markets. 



35 

Mr. Stenholm. I would like to combine both of the last two pan- 
els. I apologize. We are going to have several more votes, and I be- 
lieve it will expedite your schedules and all if we will ask panel 3 
and panel 4 to come to the table at this time. 

Our next witness will be Ms. Marilyn A. Hurt, chair of the legis- 
lative committee, American School Food Service Association. 

STATEMENT OF MARILYN A. HURT, CHAIR, PUBLIC POLICY 
AND LEGISLAITVE COMMITTEE, AMERICAN SCHOOL FOOD 
SERVICE ASSOCIATION 

Ms. Hurt. Thank you, Mr. Chairman. I am delighted to rep- 
resent the American School Food Service Association here today. I 
am Marilyn Hurt, the supervisor of school nutrition programs for 
LaCrosse, Wisconsin, and chair of ASFSA's public policy and legis- 
lative committee. 

The commodity distribution program has been a part of the 
school lunch program since the beginning. Indeed, USDA was dis- 
tributing commodities to school food programs prior to the enact- 
ment of the National School Lunch Act in 1946. 

The USDA CLOC pilot program, as you know, continues today as 
a result of several congressional extensions in the pilot program. 
Throughout this entire period, ASFSA continued to support, and 
supports today, the USDA commodity distribution program. 

About 20 percent of the Federal support for the national school 
lunch program is in the form of USDA commodities. The commod- 
ities are an important part of our programs. In addition to the 14 
cents that we receive in entitlement commodities, we receive bonus 
commodities when they are available. During the mid-1980's, when 
our program suffered drastic budget cuts, we relied heavily on the 
bonus commodities to reduce our food costs and provide economic 
stability to our programs. 

In addition to the economic support provided by the commodity 
distribution program, commodities have been a part of the histori- 
cal roots of the school lunch program, one of the stated purposes 
of the program, and a part of the political base of the school lunch 
program. 

Some might argue that from an agricultural perspective, the im- 
portance of the school lunch program is greater today than it was 
in earlier years. 

As you know, a number of ag organizations wrote to President 
Clinton in March of 1994 urging his support for an increase in com- 
modity purchases for domestic distribution. Their thesis was that 
under GATT, domestic agricultural price supports will be lowered. 
However, GATT allows the United States, and all other parties to 
the treaty, to continue to support domestic agriculture through the 
purchase and distribution of domestically produced commodities. 

One of the specific CLOC provisions in H.R. 8, a new idea, would 
be to allow schools to use 10 percent of their commodity entitle- 
ment for CLOC's for fresh fruits and vegetables. ASFSA is commit- 
ted to the dietary guidelines and has endorsed all three versions, 
including the one released in 1990, which for the first time applied 
to children. 

We are concerned, however, about this provision because it tells 
us how to achieve the goal rather than focusing on the goal itself. 



36 

This provision could provide more paperwork to a program that al- 
ready has too much. The administrative costs for this very small 
provision would not be a wise use of these limited resources. 

One of our major concerns with CLOC is the administrative com- 
plexity. Currently, the CLOC pilot programs are administered by 
the Virginia Polytechnic Institute, which has been able to provide 
all of the pilots with significant personal attention. That kind of 
hands-on assistance would not be available if there were thousands 
of CLOC's. One of the major goals of H.R. 8 is to lower administra- 
tive burdens and costs suffered by our programs. The Education 
and Labor Committee included many strong provisions to reduce 
paperwork and increase flexibility in H.R. 8. We fear that the fruit 
and vegetable CLOC provision could go in the opposite direction. 

It is equally important to point out that those schools which have 
experimented with the CLOC pilot have, by and large, been satis- 
fied with the program. Indeed, some CLOC sites are more than sat- 
isfied. They believe that CLOC is far superior to the commodity 
program. Under CLOC, commodities do not have to be stored and 
schools don't have to worry about whether USD A will deliver the 
commodities on time. 

We also appreciate the fact that the members of the House Edu- 
cation and Labor Committee, who are strong and committed allies 
of our programs, feel that CLOC would work better from a local 
school perspective. 

In many ways, Mr. Chairman, the CLOC issue represents a con- 
flict between two important, yet different, policy objectives. ASFSA 
will almost always support giving local school food service adminis- 
trators greater flexibility and more options so that we might decide 
for ourselves how best to run our programs. 

In the area of CLOC and commodities, however, the goal of local 
flexibility comes up against the national policy objective of helping 
domestic agriculture. If the Congress were to terminate the com- 
modity distribution program in favor of either cash or CLOC, it 
would be a fair question to ask whether the school lunch and 
breakfast programs should remain in the Department of Agri- 
culture. It is not my intention to answer that question today, but 
rather to recognize the larger policy implications of terminating the 
commodity distribution program. 

If we are going to sever our link with agriculture, we should also 
ask whether or not we should move beyond CLOC and go straight 
to cash. Since 1981, when the CLOC pilots started, we have seen 
Federal support for the school lunch programs slashed and the reg- 
ulatory burden increased. If Congress were to decide that the 
school lunch program was no longer important as an ag program, 
then perhaps we should not impose the administrative burden of 
running the CLOC program, and should just give the school dis- 
tricts cash. 

We have been talking about CLOC and cash and commodity re- 
form for more than a decade. We actively supported the Commodity 
Distribution Reform Act of 1987, which improved the commodity 
program. The commodity program is far superior today to what it 
was in the 1980's. 

Our association supports the national policy objective of helping 
domestic agriculture and believes we can work with Congress and 



37 

USDA to continue to improve the commodity program in ways that 
will benefit both agriculture and the Nation's children. 

[The prepared statement of Ms. Hurt appears at the conclusion 
of the hearing.] 

Mr. Stenholm. Next, Ms. Catherine Miller, president of the 
American Commodity Distribution Association. 

STATEMENT OF CATHERINE MILLER, PRESIDENT, AMERICAN 
COMMODITY DISTRD3UTION ASSOCIATION 

Ms. Miller. Good afternoon, Mr. Chairman. My name is Cath- 
erine Miller, and I am the president of the American Commodity 
Distribution Association. I am also the chief of the New York State 
Bureau of Government Donated Foods which distributes federally 
donated commodities through eight of the Department of Agri- 
culture's food distribution programs. I appreciate the opportunity to 
testify before the committee on the commodity letter of credit provi- 
sions of H.R. 8, the child nutrition reauthorization bill. 

ACDA is a nonprofit professional association whose members in- 
clude State and territory commodity distribution agencies, agricul- 
tural organizations, food processors, warehouses, food banks, com- 
mercial distributors and transportation companies, recipient agen- 
cies and individuals. We work closely with our members, the De- 
partment of Agriculture, allied organizations, and various hunger 
relief and advocacy groups to improve the commodity distribution 
program and consistently meet the needs of the recipients as they 
change. 

Mr. Chairman, ACDA's position on the CLOC program is simple. 
We oppose any extension or expansion of the CLOC program, and 
we oppose the CLOC provisions included in H.R. 8. It is our opin- 
ion that the current CLOC pilot projects should return to the com- 
modity distribution program when the authority for these pilots ex- 
pires later this year. 

The CLOC provisions of H.R. 8 would permanently reauthorize 
the existing cash and CLOC pilot projects, establish one statewide 
CLOC pilot if requested by 80 percent of the schools, and allow 
schools to receive 10 percent of their commodity entitlement as a 
CLOC for fresh fruits and vegetables. 

Our opposition to these provisions does not mean that we do not 
support the goal of increasing the use of fruits and vegetables in 
the school lunch program. On the contrary, we strongly support 
that goal. We simply believe that a specialized CLOC for fresh 
fruits and vegetables is neither the most effective nor the most effi- 
cient means of achieving this goal. 

The CLOC pilots characterize what we hear all too often about 
Government programs, especially agricultural programs: That a 
pilot program is nearly impossible to eliminate after it is initiated. 
I won't go into the history of the projects and the pilots because 
that has already been discussed by at least two or three of our 
other witnesses this afternoon, and I don't see any point taking up 
the time to do that. 

We do feel the commodity distribution program is better suited 
to meet the needs of schools and American agriculture than the 
CLOC program. We believe the commodity distribution program 
has the unique ability to spend and reap a benefit from the same 



38 

dollar twice, something that is very hard to do today, once when 
it purchases commodities and a second time when these commod- 
ities are donated to schools and other outlets. 

Last month, ACDA and 16 other agricultural groups wrote to 
Secretary Espy outlining our concerns about the fate of the CLOC 
program. This letter outlined the basis of ACDA's opposition to the 
CLOC program which is very similar to USDA's rationale for op- 
posing this program. 

We are pleased that Secretary Espy has taken a position oppos- 
ing the CLOC pilots as did his predecessor, Secretary Madigan. 
The Department's official opposition to the CLOC pilots was in- 
cluded in its analysis of H.R. 8 which was sent to the House Edu- 
cation and Labor Committee on May 16. 

I would like to summarize briefly our reasons for opposing the 
CLOC program and the CLOC provisions of H.R. 8. First, the com- 
modity distribution program purchases products at the lowest pos- 
sible price and in such large quantities that it provides economies 
of scale the CLOC program simply cannot offer. Coupled with the 
Department's massive buying power, these purchases guarantee 
that Federal money is spent as economically as possible. CLOC 
purchases, being at the consumer end of the market, are more cost- 
ly, and cannot possibly match USDA's buying power, even when 
made by large school districts. 

Second, the Department's purchases have a significant stabiliz- 
ing effect on the agricultural market. Any expansion of the CLOC 
program would hinder not only the Department's ability to provide 
nutritious products to the child nutrition programs, but also its 
ability to stabilize agricultural markets. 

Further, the commodity distribution program will be of even 
more importance to American agriculture after implementing legis- 
lation for the General Agreement on Tariffs and Trade is passed. 
GATT would restrict the Department's ability to support American 
agriculture and protect the market from unavoidable price fluctua- 
tions. However, GATT specifically exempts green box programs 
from being defined as trade barriers. 

Green box programs include several domestic food assistance pro- 
grams served by the commodity distribution program, such as the 
emergency food assistance program. Indeed, funding levels for 
these programs should be reviewed and possibly increased if Con- 
gress wants to maintain the Department's ability to stabilize mar- 
kets in a manner that is acceptable under GATT. 

Third, rural areas and small school districts would be at an eco- 
nomic disadvantage by using CLOC. The commodity distribution 
program provides products and services at equal cost to school dis- 
tricts regardless of size and location. Small, rural school districts 
in every State receive products at the same value as the larger 
cities in that State. Under CLOC, larger cities would benefit from 
lower transportation costs and leveraged buying power, while the 
smaller districts would be forced to pay much more for comparable 
services. 

Despite its reputation as an urban State, New York has many 
rural areas and some are so small and remote that schools have 
difficulty identifying vendors to serve them. Providing such dis- 



39 

tricts with a CLOC would be of no benefit, and would only serve 
to increase their frustration. 

Fourth, the CLOC program is an additional administrative ex- 
pense for the school lunch program. The current CLOC pilots rely 
on the duplicitous administrative structure that diminishes the 
funds of the school lunch program as a whole. The Department es- 
timates that expanding the CLOC program would incur additional 
costs. 

If a statewide CLOC is created, as proposed by H.R. 8, the De- 
partment estimates the program would cost up to $2 million to op- 
erate. This expense would be an unnecessary drain on the Depart- 
ment's resources, and is money that could be better spent else- 
where. As we continually try to reduce costly administrative bur- 
dens, this is a step in the wrong direction. 

Fifth, the school lunch program is the backbone of the commodity 
distribution program. If the CLOC program is expanded and more 
schools use a CLOC option, the infrastructure provided by the com- 
modity distribution program would be weakened significantly. If 
this does happen, we need to ask ourselves: What will happen to 
the smaller programs served by the commodity distribution pro- 
gram? 

TEFAP, the soup kitchens and food banks program, the food dis- 
tribution program for Indian reservations, and the Department's 
disaster assistance efforts would be weakened by the expansion of 
the CLOC program. Disaster assistance is a perfect example. As we 
have learned in recent years, commodities in storage at recipient 
agencies or in warehouses for schools are often the first response 
to natural disasters. 

Sixth, the commodity distribution program can guarantee that 
the purchased commodities are domestically produced, but the 
CLOC program cannot make a similar guarantee. Although CLOC 
purchases are required to follow the same domestic content policy, 
attempts to assure domestic content are burdensome, costly, and 
uncertain. 

In a time when we are attempting to reduce the paperwork bur- 
den on schools, the CLOC program would simply provide another 
avenue for reviews, verifications, and undue emphasis on the ad- 
ministrative aspects of the program to the detriment of the real 
focus — feeding hungry children. 

In 1987, Congress passed the Commodity Distribution Reform 
Act and WIC amendments of 1987. This law brought about monu- 
mental improvements in the program, both by USDA and by State 
distributing agents like myself. One significant improvement was 
in the area of quality. 

Commodities purchased by USDA have shown significant im- 
provement in recent years in terms of their nutritional qualities. 
Fat, sodium, and sugar are routinely reviewed, and our schools find 
that USDA commodities can form the basis for sound nutritional 
meals for children. 

Many schools have told me it is not possible for them to purchase 
the same quality that the Department provides, and their costs 
would be higher even when purchasing products of lesser quality. 
Today, foods purchased by USDA are universally recognized as 
being the best money can buy. Not only has the nutritional profile 



40 

and variety of products improved, but new packaging better meets 
the needs of recipient agencies and the delivery system has become 
more timely and responsive. 

Another major improvement was the creation of a National Advi- 
sory Council for Commodity Distribution. The advisory council 
brought together representatives of all groups served by the pro- 
gram to continuously identify additional areas where services can 
be improved. As a result of the advisory committee's initiatives, re- 
cipients, especially school districts, are more than satisfied with the 
operation of the current program. 

Mr. Chairman, ACDA believes that the commodity distribution 
program is the most economical system for providing schools with 
the nutritious products they need. 

In recent years, the cooperative effort between the Department 
and the agricultural community has improved the distribution pro- 
gram and its products to better meet the demands of recipients. 
These changes have helped and will continue to help the program 
meet its traditional goals of providing nutritional assistance to 
schools and support of American agriculture, two goals the CLOC 
program can never hope to realize. 

The Commodity Distribution Program still works, and there is no 
question it will continue to evolve and improve its services, even 
with the implementation of the dietary guidelines that were an- 
nounced yesterday. The dietary guidelines are an important part of 
the Department's mission, and ACDA, ASFSA, and many other 
groups support these guidelines. 

Some would argue that the commodity distribution program is 
incapable of meeting these goals, but that simply is not true. The 
commodity distribution program has proven it is capable of chang- 
ing to meet the evolving needs of its recipients, and it is well suited 
to deliver products that adhere to the dietary guidelines. The com- 
modity distribution program can and will meet any challenge that 
the implementation of these guidelines may present. 

Thank you again for the opportunity to testify. I would be de- 
lighted to answer any questions you might have. 

[The prepared statement of Ms. Miller appears at the conclusion 
of the hearing.] 

Mr. Stenholm. Next we will hear from Ms. Pat Holstein, food 
service director, Lexington School District. 

Mr. Farr. Mr. Chairman, may I ask a question? We are all sort 
of going back and forth between votes, just make a quick comment? 

Mr. Stenholm. Make it quick. 

Mr. FARR. Thank you. I want to just say I really agree that the 
USDA can coordinate the twin objectives of both distributing food 
and dealing with the market surpluses. My opinion, the CLOC pro- 
gram would only cover about 10 percent of the goods received by 
schools from USDA. 

The question I want to know is how much does the administra- 
tion of the CLOC program cost USDA per year and if the CLOC 
does interfere with the ability of USDA to remove market surpluses 
effectively, do we have any data on to what extent it interferes and 
lastly if H.R. 8 were implemented as it now stands, what percent- 
age of the food received by the schools from the USDA would go 
through the CLOC system? 



41 

Could you get answers to those questions for me and send them 
to my office? 

Mr. Stenholm. I believe that question should have been asked 
of Ms. Haas and the previous panel. We will get answers in writing 
for those questions for you from the previous witness. 

Mr. Farr. Thank you. I appreciate that. 

Mr. Stenholm. In fact, they were written in some of the written 
testimony you have, you have some of the answers to the cost in 
Ms. Haas' question. 

Mr. Farr. I will look to that. The bell rang before I got to answer 
my question. 

Mr. Stenholm. Good. 

Proceed, Ms. Holstein. 

STATEMENT OF PAT HOLSTEIN, DIRECTOR, FOOD SERVICE, 
LEXINGTON SCHOOL DISTRICT 3, BATESBURG, SC 

Ms. Holstein. Thank you. Mr. Chairman, members of the com- 
mittee, my name is Pat Holstein and for the past 15 years, I have 
been food service director of Lexington School District 3 in 
Batesburg-Leesville, South Carolina. This is located near the center 
of the State, about 35 miles south of Columbia, the State capital. 
It is a very rural area, and as far as agriculture goes, the main 
money crop is peaches. 

Lexington District 3 is a very small school district with only 
2,400 students and four schools. We feed an average of 1,850 stu- 
dent lunches each day and 725 eat breakfast. We serve 4- and 5- 
year-old kindergarteners as well as grades 1 through 12. 

Fifteen years ago, commodities came in without a schedule that 
I could ever determine. They simply arrived, and the cafeterias had 
to find some way to store them. Then the cafeteria manager had 
to find some way to prepare them so the kids would eat them. Most 
of these commodities were in a form that was very labor intensive, 
and the thing that really concerned me about commodities was the 
attitude the cafeteria workers had. They felt they were free, they 
were very careless in the use of them, they wasted them, and com- 
plained constantly about them. They never thought of them as cost- 
ing money. 

When I was asked by South Carolina's commodity chief at the 
time, Mr. Ramon Aycock, to take part in this cash/CLOC study, I 
felt it would be a wonderful challenge and might help the food 
service program financially. I knew the cafeteria workers would 
think of CLOC food then as real food and be more careful in its 
use. I was right on both counts. 

The CLOC money is sent quarterly, as most of you know. In 
other words, instead of having that 14 cents a meal tied up in stor- 
age, the district has up-front money to buy food as USDA does, but 
in a form usable right then. For instance, instead of whole turkeys, 
turkey rolls or roasts, the district buys a lot of ground turkey. It 
is cheap, it is in a usable form, and it is low in fat. 

Several years ago, I was teaching a Red Cross course called Bet- 
ter Eating for Better Health to the cafeteria managers. This course 
was all about cutting the fat, sugar, and salt in the diet. As a re- 
sult of this 6-week class, we began to change our recipes to reflect 
these new ideas. 



42 

Without saying one thing to the students or teachers, we did a 
few simple things. We reduced the sugar by one-third in foods and 
began offering more fresh fruits as desserts. We reduced the salt 
in foods and removed salt shakers from tables. We began using 
more fresh and frozen vegetables. 

When USDA came out with the latest food pyramid and sug- 
gested keeping the fat to 30 percent of the calories in our lunch 
menus, we were already doing this in our cafeterias. 

Approximately 15 percent of the money spent on food in our cafe- 
terias now is for fresh fruits and vegetables. With the CLOC's re- 
ceived, we can buy fresh, frozen, or canned foods, and the favorite 
vegetable in our schools is broccoli, cooked or fresh. 

Children eat at school what they are used to eating at home, so 
we try to educate the parents in nutrition as well as the children 
by publishing menus in the local and State newspaper. These 
menus have been analyzed by some software called NutriKids 
which has all the USDA recipes and products and the nutritional 
data on them. Monthly menus are sent home with each child. I 
might say, I received one of those NET grants, and that is how I 
bought this NutriKids. 

Now, what does all this have to do with CLOC? One, the food, 
both CLOC and purchased, is bid. And when I bid it, I specify it 
has to be produced in the United States. The CLOC food gives me 
more buying power. The food costs for our district have not in- 
creased in several years, which keeps our paid lunch price at $1 
and $1.15, and 50 cents for breakfast. 

To have commodities shipped from the warehouse to a cafeteria 
costs $1.75 a case or bag. With the food I bid, this is included in 
the cost. When this $1.75 is added to the cost of the commodity, 
my price is almost always as cheap or cheaper. 

Two, financially, we stay in the black. We are able to buy equip- 
ment and keep our cafeterias attractive. 

Three, we are meeting those dietary guidelines. 

Four, we have a high participation in breakfast and lunch be- 
cause we can offer foods the kids will eat. 

Five, our food inventory is kept at a reasonable level. At the end 
of the year, we do not have a large food inventory to worry about 
like we did when we had commodities. Even with all the improve- 
ments made in commodities, these commodities still come in at the 
very end of the school year and have to be stored. 

When Hurricane Hugo visited our State a few years ago, we 
thought our area of the State would be affected. If it had been, 
there was enough food available in our cafeterias to feed 2,000 
lunches and 1,000 breakfasts every day, which would have almost 
fed Batesburg-Leesville. We could have done this for 7 days. If we 
would have had commodities, there would not have been enough in 
the freezer, cooler, and store room to do this because that food 
would not have been easy to prepare. 

Yes, we continue to get bonus commodities, but every year they 
dwindle. Eight years ago, I think my bonus commodities were 
maybe $12,000. This year, they were $6,100. Yes, I understand 
from other food service directors that commodities have improved 
in the way they are packaged and in acceptability, and I think you 
might thank these cash/CLOC pilot programs for that^ because we 



43 

have more or less been a thorn in your side, but maybe you needed 
that. 

If we are capable of buying over 90 percent of the food — and from 
my figures, I came up with 10 percent for the commodities plus the 
bonus — why can't we buy 100 percent? I reproduced some charts 
showing you how our expenses were in our district. As you can tell, 
I was taking a computer program and this was one of my projects 
for the program. 

It is important to keep the cash/CLOC option in H.R. 8 even 
though it is included in H.R. 4221. This pilot program deserves to 
be permanently authorized. It is an improved program and de- 
serves special consideration. It is a wonderful way for a State to 
make comparisons on food costs and acceptability of school lunches 
and breakfasts of CLOC schools as compared to commodity schools. 
Now listed below are several more reasons for permanently author- 
izing the cash/CLOC program. 

One, the continuation of the program requires no additional 
funding. 

Two, CLOC has had one of the greatest impacts on school lunch 
service programs, particularly with increased participation, more 
flexibility, improved nutritional awareness, and provides the chil- 
dren with acceptable meals with a minimum of waste. The need for 
food to come in different forms has been tremendous. Our children 
receive the benefits. 

Three, the CLOC program must spend their vouchers at the 
same time the USDA is making their purchases. This relieves sur- 
pluses of specific farm products and meets price support goals. Po- 
litical ties can be far more reaching when we purchase locally since 
we affect more farmers and industries than when USDA purchases 
the food. The CLOC program still meets the farm support objec- 
tives and works much better for schools. 

Four, since we bid, we had competitive prices on our CLOC pur- 
chases, and they were delivered at the same time as our groceries 
without additional expense. We were able to coordinate deliveries 
with menus, thereby giving us security in planning. This saved on 
warehousing and storage. 

Five, in some cases, we were able to serve foods purchased with 
CLOC funds before commodity schools were notified they were 
going to receive it. This has been proven. 

Our concerns, yours and mine, have to be for the good of the pro- 
gram. The study has proven, without a doubt, that CLOC is a via- 
ble alternative to the present commodity system. Please allow us 
the option of CLOC and extend that option nationwide. 

We are deeply grateful for your support for child nutrition pro- 
grams, and please consider the positive effects of the CLOC pro- 
gram. We have tremendous respect for the Agriculture Committee 
and trust you will consider what is best for the national school 
lunch and breakfast program. The ease of the CLOC program and 
adaptability to our needs warrant a hearty stamp of approval. 

Thank you. 

[The prepared statement of Ms. Holstein appears at the conclu- 
sion of the hearing.] 

Mr. Stenholm. Thank you very much. 



44 

Let me ask you, do your schedules permit you to stay? I have a 
vote and we have to take a little break here. Do your schedules 
permit you to wait? 

We will stand in recess for approximately 10 minutes. 

[Recess taken.] 

Mr. Stenholm. The subcommittee will again come to order. We 
will hear from our next witness, Mr. Rick Pasco, vice president of 
government affairs, National Pork Producers Council. 

Welcome. 

STATEMENT OF RICHARD PASCO, VICE PRESIDENT, GOVERN- 
MENT AFFAmS, NATIONAL PORK PRODUCERS COUNCIL, ON 
BEHALF OF THE COMMODITY DISTRIBUTION COALITION 

Mr. PASCO. Thank you. I am presenting today's testimony on be- 
half of the Commodity Distribution Coalition. This coalition is an 
informal group of agricultural associations that are strongly sup- 
portive of the Department of Agriculture's commodity distribution 
programs, which serve the dual purposes of providing the best pos- 
sible nutrition for our Nation's schoolchildren and of helping sta- 
bilize U.S. agricultural commodity markets. 

Mr. Chairman, I would like to ask that my written statement be 
made part of the official hearing record. I also wish to add two or- 
ganizations to the list of those signing on this testimony. Those two 
organizations are Western States Meat Association and the Apricot 
Producers of California. 

Mr. Stenholm. Without objection. 

Mr. PASCO. We appreciate this opportunity to testify on the com- 
modity letter of credit provisions contained in H.R. 8. We have 
great concerns about how the extension or expansion of the CLOC 
program would affect the future viability of the USDA's commodity 
distribution programs. Our coalition, which is representative of the 
agricultural community, is opposed to the continuation of the 
CLOC program. We believe that the CLOC provisions of H.R. 8 
threaten the long-term operational effectiveness of the overall com- 
modity distribution system. 

USDA's ability to stabilize agricultural markets through large 
volume purchases of commodities would be seriously compromised 
without the assistance of a significant commodity distribution pro- 
gram. 

The commodity program will be even more significant now that 
the Uruguay Round of the GATT is completed. With the successful 
conclusion of the Uruguay Round, the United States will face both 
a reduction in tariff receipts and a phase-down of direct price sup- 
ports. Reductions in import tariff receipts that are used to finance 
USDA commodity purchases and provide direct funding to schools 
will also affect the overall Federal Government assistance available 
for our Nation's food assistance programs. Any phase-down of price 
supports and loss of tariffs will also make it more difficult for the 
United States to support agricultural production. 

It is also important to note that commodity purchases by the 
USDA only represent about 20 percent or less of the food acquired 
for the school lunch program. This leaves considerable flexibility to 
school districts which can continue to use the vast majority of 
funds that are remaining for other purposes, including labor costs 



45 

and purchases of food locally. The various USDA commodity dis- 
tribution programs give the Secretary of Agriculture an extremely 
effective tool that he can use in providing assistance to America's 
agricultural producers. 

One of the major goals of our agricultural policy has been to sta- 
bilize the "boom or bust" swings in the farm economy. When mar- 
kets are soft in a given commodity, the Secretary can help boost 
market prices by purchasing the commodity that is experiencing 
depressed prices. For many commodities such as pork, beef, turkey, 
chicken, eggs, peaches, apples, cherries and many others, the com- 
modity distribution program represents the only significant pro- 
gram available to the Secretary of Agriculture as a market stabiliz- 
ing mechanism. 

USDA commodity programs have not only played a special role 
in the development of agricultural policy, but have played an im- 
portant role in the development of this Nation's nutrition pro- 
grams. The commodities provided for in the school lunch meals, for 
example, have played a key role in meeting the recommended nu- 
tritional needs of children while keeping costs down. 

In recent years, the USDA and the agricultural community have 
worked together to improve the distribution program and the nutri- 
tional profile of products to meet the needs of recipients. By build- 
ing on these improvements, the program will be able to meet the 
changing needs of its recipients and simultaneously support Amer- 
ican agriculture. 

After a number of reauthorizations by Congress and years of on- 
going review, it is clear that the commodity program now in place 
works better than the CLOC/cash alternative. The more-than-a- 
decade-long study has yielded no compelling evidence sufficient to 
warrant Congress to again extend and even expand the number of 
CLOC sites. Congressional termination of the CLOC program is 
long overdue. 

We strongly support the USDA's position opposing all provisions 
in H.R. 8 that make permanent the existing pilot projects that op- 
erate CLOC systems or expand the number of CLOC sites. As stat- 
ed by the USDA, it is in the best interests of agricultural produc- 
ers, administrators of commodity distribution systems, and the re- 
cipients of USDA's domestic commodity programs to retain the tra- 
ditional commodity programs. 

Commodity letters of credit or even cash given directly to schools, 
by themselves, cannot match the buying power of a single Federal 
Department in making large volume purchases of commodities. In 
addition, the USDA's commodity program assures the domestic ori- 
gin of the foods purchased, which is clearly a critical feature of the 
program. 

We have serious concerns about the long-term implications of 
section 110 of H.R. 8. If a whole State can opt out of the commodity 
distribution program, the Secretary of Agriculture's ability to have 
a positive impact on the market price of a particular commodity 
will be reduced over time as the size of the USDA purchases 
shrink. 

Moreover, as the volume of commodities purchased is reduced, 
the effectiveness of the commodity distribution network in provid- 



82-893 0-94-4 



46 

ing the commodities to food assistance programs outside of the 
school feeding program is jeopardized. 

We urge this committee to reject the provisions of H.R. 8 that 
further expand the number of CLOC sites. It is time to recognize 
the CLOC program has been sufficiently reviewed after a decade 
of experimentation. We believe the day has come for Congress to 
put an end to this program. 

In times of serious budgetary constraints, the Federal Govern- 
ment can no longer afford the luxury of paying the administrative 
costs of dual programs that serve the same purpose. Once and for 
all, we must choose the commodity program over the CLOC pro- 
gram. There is not sufficient justification for Congress to again ex- 
tend the CLOC program one more time and continue to administer 
overlapping programs. 

[The prepared statement of Mr. Pasco appears at the conclusion 
of the hearing.] 

Mr. Stenholm. Thank you, each of you, very much for your testi- 
mony today. 

Two or three questions that I wanted to ask of this panel. 

Ms. Hurt, you stated some concerns about the dietary guidelines. 
The one released in 1990? Or were you talking about the proposed 
rule that was released for comment yesterday by the Department? 

Ms. HURT. I indicated that our association has supported the die- 
tary guidelines over the years through the three different editions 
that have been released and the most recent edition was released 
in 1990. I was not referring to yesterday's. 

Mr. Stenholm. So when you are talking about the provision tell- 
ing you how to achieve the goal, it is my understanding that pro- 
posal out for comment now is going to try to steer away from tell- 
ing you how to do it; just state the goals and let the individual 
school lunchroom providers make those determinations with cer- 
tain flexibility. 

Ms. Hurt. I have not yet read the regulations, and we hope that 
it does improve our flexibility. We are concerned about the 
weighting of different food items. We are wondering if, in fact, that 
will reduce the variety of products that we offer. And one of the di- 
etary guidelines is to increase the variety of foods offered and 
consumed. So we hope that the regulations meet the dietary guide- 
lines in that area, also. 

Mr. Stenholm. My own purpose in bringing that up, the purpose 
of this hearing today is on the commodity programs and improving 
in those areas. We intend to hold oversight hearings, probably in 
late July or early August, during the comment period regarding the 
dietary guidelines, and also hopefully continue improvement in the 
manner in which the commodity programs are working. So we in- 
tend to provide some additional oversight in that area working 
with all groups to see that we accomplish what each of you want 
accomplished. 

I must say Ms. Holstein, I appreciate your testimony and your 
commitment to CLOC. You obviously believe it to be working be- 
cause it has demonstrated to be working for you. You undoubtedly 
have listened to the allegations that it is fairly costly compared to 
CLOC. There are also allegations that we don't take into consider- 



47 

ation all of the costs, et cetera and these are things that we need 
to continue to look at. 

But, I must tell you that it is the intent of this chairman, and 
I believe I speak for this subcommittee, to work to make the dis- 
tribution program work better so you will want back in. That is my 
goal. Because I truly fear that if we go CLOC for everyone, that 
you will not be as supportive and happy with the program in the 
long term as you would be if we do a better job on the distribution 
of commodities so that you would want back in and not want to be 
a part of CLOC. 

And that is what I hope with today's hearing and some addi- 
tional work along these lines that we will accomplish. Because 
when I mentioned a moment ago that if we do CLOC for everyone, 
then all of a sudden it is a cash distribution program, and then I 
don't know of any real reason to continue the cash program, the 
support thereof, in light of tight budgets. 

I mean we had revenue sharing for cities. A wonderful program, 
worked extremely well. It was one of the most efficient programs 
that we could possibly have, but we eliminated it for one reason 
and that was because we didn't have revenue to share. And the 
same, I am afraid, will move in the school lunchroom from a Fed- 
eral perspective because most Members of Congress that I am 
aware of believe that education is a State and local issue and the 
Federal involvement should be minimal. 

And one of the reasons why the commodity program has worked 
so well for all parties is that there has been a joint benefit. Produc- 
ers as well as consumers have jointly benefited. And it is a kind 
of goal that I have as chairman of this subcommittee to keep work- 
ing to bring consumers and producers together. 

Far too often the middleman gets involved in this and the 
consumer and the producer do not benefit. And so I think it is ex- 
tremely important that we work to improve the manner in which 
the commodity program works, particularly as Mr. Pasco testified 
as to GATT and what we have already seen where we are moving 
more and more to market-oriented programs. 

And when we start doing that, there is going to be a dramatic 
effect on feeding programs, and the commodities are very impor- 
tant to most of our school lunchrooms. 

We have weaknesses in the program, and even though we have 
improved it since 1987, I think there is a lot more improvement 
that can be made if we just put our shoulders to the wheel and de- 
cide that is what we want to do. 

I am worried, though, when we start having divisions of opinion, 
and some urging making permanent a temporary, experimental 
project that has not — well, you say it has worked beautifully. If it 
has worked beautifully, then why shouldn't we do it for everybody? 

Ms. Holstein. It would suit me. 

Mr. Stenholm. It would suit you? But it doesn't suit everybody 
else? 

Ms. Holstein. That is right. 

Mr. Stenholm. That is what makes this country such a great 
country, isn't it? We can have differences of opinion. 

What is your reaction? How would you respond to my generalized 
statement that I just made? 



48 

In all honesty, if CLOC is working, and in all fairness I have not 
seen evidence that it is working so well that I would be enthusias- 
tic in putting it into every single school district, nor did Mr. Good- 
ling, which indicates to me that there may be some weaknesses to 
the program. Do you see any or are you here totally in support of 
CLOC? And you have already stated, but I just want to have you 
say it again, you would like to see CLOC for everyone; for your 
school district and you believe it will be good for other school dis- 
tricts in your State and be good for the Nation if we CLOC'ed ev- 
erything? 

Ms. HOLSTEIN. It has worked for me, because I have had a per- 
sonal interest in it and I wanted it to work. I still think it was just 
an option that was out there as an option. It has done a whole lot 
of good in that we have changed a lot of commodities. Commodities 
have gotten better. I think there are some commodities we should 
never support, since you asked me. 

I see no need to support pineapple since it is very hard to find 
any produced in the United States. I find it very hard to support 
the prune industry when we have such a hard time getting rid of 
them. 

There are some crops I have never quite seen the need to sup- 
port, and I have an agricultural background myself. I was raised 
on a farm. I think the big thing to begin with was to get rid of the 
surplus products, and you have always done a very good job of it. 
I could see us, as I said, as having a CLOC site maybe in every 
State to sort of counterbalance and see where changes might be 
made and sort of keep USDA on their toes, but I would not know 
how to answer that because I have been out there sort of by myself 
doing this. 

There have been so few doing it. How do I know how it would 
work for everybody? Everybody may not bid their food like I do. 
But it would certainly work for small districts because it comes in 
with regular food. Does that answer your question or confuse you? 

Mr. Stenholm. Yes, ma'am, that answered it and one of the key 
things that you said, it worked for you because you wanted it to 
work. And that is not a bad philosophy for Government; that if we 
want the commodity program to work, we need to work at making 
it work and if you don't want it to work, it is not going to work. 

And far too often that is what we end up doing. We don't want 
them to work or we are not willing to do, as apparently you have 
done with your school district. You put in the necessary time and 
effort to make it work and apparently you are doing a very good 
job. The fundamental question for all of us, though, will it work 
equally well for all? 

And that is where I have a fundamental problem. And I would 
answer my own question saying I don't believe that it would for the 
reasons that I have tried to state. But that does not mean nec- 
essarily that it would not. 

Ms. HOLSTEIN. But if you are going to buy, as I said, like 90 per- 
cent of your food, I really don't see why you couldn't go ahead and 
buy the other 10 percent, if you had letters of credit and specifi- 
cally say you have to spend this much for beef and you have to 
prove that you bought this beef or this turkey or whatever, you are 



49 

still spending it on beef or turkey. You are still getting it off the 
market. 

Mr. Stenholm. You believe you can buy it as cheap as USDA 
can buy it? 

Ms. Holstein. I do. 

Mr. Stenholm. You do. Day in and day out? 

Ms. Holstein. Yes. 

Mr. Stenholm. The rest of the folks ought to be taking a look 
at you. You ought to write a book because you have something 
going for you that the rest of us could use. 

Ms. Holstein. Would you like my specs? 

Mr. Stenholm. Ms. Hurt, and Ms. Miller, any specific sugges- 
tions additional to what you have stated in the record or maybe re- 
emphasizing your statements as to how we can make the commod- 
ity program work better so Ms. Holstein would want in it and not 
out? 

Ms. Hurt. Yes, Mr. Chairman. First, I want to say that I dis- 
agree with Ms. Holstein in her statement that some commodities 
shouldn't be commodities. I think that those are nutritious foods 
and when they come into our schools then we are challenged to use 
them. And take prunes, for example. They are high in fiber. They 
are very nutritious, and so we are challenged to use them. 

I think we receive asparagus, for example. I don't know if I ever 
would have put asparagus on the menu had it not come in as a 
commodity, but it came in and it was beautiful and we served it 
and the kids like it. We are now bidding asparagus. I think it 
brings foods in that we might not have thought about using. I 
think that the program can be improved. 

I talked to people in other States who are still complaining about 
distribution problems. Wisconsin has a very good program, and 
that is probably one of the reasons that I feel so strongly about it. 
However, I think we should look more carefully in the area of fresh 
fruits and vegetables. 

Maybe that is not the place for fresh fruits and vegetables in the 
commodity program. We need to be shown how to use more fresh 
fruits and vegetables. We need regulations that allow salad bars, 
for example. Currently 3'ou have to do your point of surface at the 
end of the line and you don't have the room for all the fresh fruits 
and vegetables that you would like for kids, so we need to look at 
the regulations that in fact prevent us from doing that kind of 
thing and then allow us to buy our fresh fruits and vegetables off 
of our local market if we want, but keep the commodity program, 
unless they are going to be able to do distributions once a week. 

Produce is very sensitive to time and temperature and needs to 
be handled carefully and different produce needs to be handled dif- 
ferently. So maybe that is not the place for it. 

I also think that we need to be able to get products when we 
need them. For example, every school I bet in this country has a 
Thanksgiving meal in November and yet we get the turkeys in De- 
cember. That just seems logical. Why is it we can't get turkeys de- 
livered so that they can be offered for that Thanksgiving meal? 

So those are the kinds of things we need to be looking at improv- 
ing. And we believe that continuous improvement is the way to go. 



50 

It has come a long way, but we would like to see it continue to im- 
prove. 

Mr. STENHOLM. I was afraid for a moment you are going to say 
that you had found a way to put prunes on asparagus and make 
kids eat them and I was going to ask you a question about that, 
but I am glad that was not the direction you were going. 

Ms. Miller. I would like to say that ACDA also believes that 
there are improvements that continue to be made and need to con- 
tinue to be made to make the commodity distribution program all 
that it can be. Certainly the timing of purchases and deliveries is 
an area where USDA has made some improvements, but we need 
to have more improvements made. 

I agree with Ms. Hurt that perhaps the commodity distribution 
program is not the place for a full array of fresh fruits and vegeta- 
bles. There are some that work fairly well like apples and pears 
and potatoes that have a relatively long shelf life but things with 
a 7-day shelf life, perhaps, that is not the place to be purchasing 
them. 

When the commodity distribution program purchases 20 percent 
of the food used by schools, perhaps it should be concentrating on 
the things that every school uses like hamburgers, turkey, chicken, 
canned peaches, canned pears, the frozen and canned vegetables. 
And maybe a wide variety of fresh fruits and vegetables is not the 
place for that 20 percent of the money to be spent. But we would 
be happy to work with you and with the Department of Agriculture 
to provide you with a list of improvements we would like to see 
made and to continue to work to make sure they are implemented. 

Mr. STENHOLM. The final question, Ms. Holstein. If you were to 
be put in charge of the commodity program to make it work, what 
are the first one or two things you would do? 

Ms. Holstein. I would probably change some of the pack size, 
and they have changed some of the pack size. I can remember 
when everything was in 50 pound bags and the ladies had to be 
able to lift 50 pounds to be able to work for the food service be- 
cause that is what that bag weighed. 

As she said, stay away from the fresh stuff. You can't transport 
that around the country. Like peaches. Here I am in peach country. 
There is no way that we can ship them up to you all in a week 
and you have fresh peaches. We certainty couldn't ship them across 
the United States. Stick to the things that they do best like turkeys 
that are boneless, chicken that is boneless, but put it in a form that 
is not a 40 pound lump. 

I mean, let's put that chicken, like I buy it, a drumstick that is 
going to provide an ounce-and-a-half of protein for that child; a 
thigh, that will provide 2 ounces, and I don't have to worry about 
all those wings and backs and stuff. Buy first quality stuff. I am 
not sure sometimes some of that stuff I used to get was first qual- 
ity, not when I had worms in the corn and they said if there is only 
one worm in the can, they said that is OK. 

Mr. Stenholm. A little higher protein. 

Ms. Holstein. Yes, that is what they said. And I don't know. 
This is going to happen any time that you buy canned stuff because 
I have gotten stuff from a wholesaler and it would have a bug, but 
all you had to do is turn the can over and give them the number 



51 

and say let me tell you what you did and he replaces it with an 
apology. You don't get that with the commodity foods. 

The bonus foods have almost dried up, if I am not mistaken, be- 
cause mine are almost down to nothing. And I don't see supporting 
pineapple when we don't grow any pineapple except for a little bit 
in Hawaii. I would get foods that we do have a surplus of, that we 
can use, and that are low in fat. 

Mr. Stenholm. I would appreciate it if each of you in the next 
5 days, since this hearing record will remain open for 5 to 7 days, 
if you think of anything else, these kinds of suggestions, put your- 
self in charge of the program, how would you do it? What would 
you do? How would you run it? And furnish those for this sub- 
committee. We intend to play a much more major role in the over- 
sight of these programs and to be a partner with USDA in seeing 
that this works for your benefit, because you are out there on the 
firing lines. 

At this table, there are the folks distributing, there are the folks 
that are using it on a daily basis, and there are the folks that are 
producing it. And I repeat, if we do not maintain a cooperative atti- 
tude and a partnership between producers and consumers, both are 
going to lose eventually. And that is the goal that we have. 

We thank you very much for taking time, for your testimony and 
for your participation today. We look forward to working with you. 

This being the last panel, we will stand adjourned. 

[Whereupon, at 4:30 p.m., the subcommittee was adjourned, to 
reconvene subject to the call of the Chair.] 

[Material submitted for inclusion in the record follows:] 



52 

Testimony of 

THE HONORABLE BILL GOODLING 

before the 

Subcommittee on 

Committee on Agriculture 

June 9, 1994 

Mr. Chairman, Members of the Subcommittee, I am pleased for 
the opportunity to appear before you today to discuss the 
provisions in H.R. 8, the Healthy Meals for Healthy Americans 
Act, which deal with the Commodity Letter of Credit (CLOC) 
alternative to the current commodity system. 

I want, however, to say up front that it is definitely not 
my intention to try to replace the current commodity distribution 
program. I understand the importance of this program to the 
agriculture community. As many of you are aware, I was reared on 
a farm and have a great deal of respect for our nation's farm 
community. In addition, I represent a district which depends 
heavily on agriculture. Finally, I am proud of the fact that my 
father, who represented the 19th Congressional District before 
me, served on the Committee on Agriculture for 7 years. 

However, as a former principal, teacher, school board 
president and superintendent of schools, I also know firsthand 
the importance of proper nutrition to a child's performance in 
school. As a result, I strongly believe we need to insure there 



53 



is a proper balance between our need to remove surplus 
commodities from the marketplace and our need to provide school 
children with healthy, nutritious meals which they will eat. 
Therefore, we need to insure the current commodity system is 
well-received by schools and that the commodities which are 
provided to schools are acceptable to participating children. 

As you are probably aware, at the present time only 46 
percent of "paying children" participate in the National School 
Lunch Program. To me, this is an indication that the meals 
currently offered under the National School Lunch Program must be 
improved so that they appeal to a larger number of children. 
Part of the improvement in meals must be an improvement in the 
types of commodities provided to schools. For example, students 
who have not been exposed to salmon, figs and dates may not eat 
them no matter how nutritious they are or how they are used by 
school food service personnel. Children tend to consume what 
they have been exposed to in their homes and many children have 
not had experience with some of the commodities offered through 
the commodity distribution system. 

I do recognize that efforts have been made over the past 
years to improve the current commodity distribution system and to 
address the problems which were behind the development of the 
original cash/CLOC pilot. I commend you on your initiatives in 
this regard. Unfortunately, problems still exist -- problems 
which have generated additional support for CLOC . 



54 



I am here today, however, in a spirit of cooperation. I 
would like to see the current commodity program improved to the 
point where we do not need the cash/CLOC alternative and I am 
willing to work with you towards such an end. 

In the meantime, however, I would like to acquire your 
support for the cash/CLOC provisions contained in H.R. 8. 

First, and foremost, there is the provision making the 
current cash/CLOC sites permanent. As you will recall, Cash/CLOC 
was developed at a time when there was a great deal of 
dissatisfaction with the commodity distribution system. Some of 
the major problems included: high storage and transportation 
costs, receipt of commodities which were in poor condition and 
did not fit into the menu or meet the tastes of students, and 
commodities received were in a form which required a lot of 
processing. 

Under the Commodity Letter of Credit alternative, school 
districts are provided with commodity letters of credit which 
they use to buy foods that contain specific types of commodities 
which the USDA distributes under the regular commodity 
distribution program. In other words, those school districts 
participating in CLOC purchase locally and in the form they 
prefer, the same commodities which the USDA is providing to 
schools through the Commodity Distribution program. Under the 
cash option, school districts receive cash in lieu of 
commodities . 



55 



Participants in the cash/CLOC program have the option of 
dropping out of these alternative projects at any time. However, 
none of the sites is currently interested in returning to the 
current system until such time as their original concerns have 
been addressed. They are not set up to participate in the 
current system and do not have the storage space to accommodate 
the commodities they would receive. Yet, every two to four 
years, they face the uncertainty of what the next year will bring 
and the problem of incurring costs related to returning to the 
current commodity distribution system. 

Mr. Chairman, according to participants in the cash/CLOC 
option, the benefits of the program which are behind their desire 
to continue to use these alternatives, include: 

1) the removal of thousands of pounds of meat, vegetables 
and fruits from the marketplace at their convenience without any 
additional cost to the taxpayer; 

2) a variety of menus, including those low in fat content, 
can be planned without the interruption of unexpected commodity 
deliveries ; 

3) the conversion of administrative cost savings to 
additional menu options; 

4) the ability to purchase commodities in a form most 
preferable to children -- including the ability to purchase 
commodities which reflect the regional, cultural and religious 
food preferences of students -- that cuts down on plate waste; 



56 



5) the increased ability to cut fat from the menu and serve 
fresh fruits and vegetables; 

6) decreased reliance on canned fruits and vegetables; 

7) more efficient operation of school kitchens due to 
elimination of the necessity of dealing with commodity deliveries 
and the time necessary to transport them from school to school; 

8) the ability to serve a more diverse menu to students 
because they are not trying to use up allotments of commodities 
received under the regular commodity distribution system; 

9) the ability to support locally owned-companies and state 
agriculture; 

10) increased student participation; 

11) the ability of the district to control the type of 
products they buy and delivery times during the year; 

12) reduced need for large dry storage and freezer space; 

13) the ability to limit increases in the cost of the 
school lunch and breakfast programs; and, 

14) the ability to receive adequate supplies of commodities 
to serve all students and to purchase commodities which do not 
require special processing or are labor intensive. 

Perhaps this list can be used as an initial starting point 
from which we can work together to improve the current commodity 
distribution program. 



57 



Mr. Chairman, I have actually heard from a large number of 
school food service directors who are interested in becoming a 
cash/CLOC site. 

At this point, however, I am not seeking an expansion of 
cash/CLOC sites. Rather, I just want to provide the current 
cash/CLOC sites with peace of mind and assure them that they may 
continue to operate alternative programs until such time as they 
decide to drop out. In the meantime, I would like to work with 
you to improve the current commodity program to the point where 
current cash/CLOC sites would be more than willing to return to 
the current system. 

I am also interested in allowing all schools to use CLOC to 
increase the number of fresh fruits and vegetables in the school 
meal program and have included such a provision in H.R. 8. 

Part of our effort to improve the nutritional content of the 
School Lunch and Breakfast Program will be to support the 
Department of Agriculture's efforts to increase fresh fruits and 
vegetables served to children participating in the School Lunch 
Program. During hearings held by USDA prior to the development 
of their new nutrition objectives for schools, they heard from 
witnesses who requested an increase in fresh fruits and 
vegetables in the school meal programs and requested increased 
purchasing flexibility for local school food service authorities. 
In my view, the Commodity Letter of Credit (CLOC) will provide us 
with the best possible mechanism to accomplish this goal until 
USDA is able to do so through the current system and in a manner 



58 



acceptable to schools. Through the CLOC program, schools will be 
able to purchase fruits and vegetables locally, thus insuring 
they are fresh and in quantities most easily utilized by school 
food service personnel . 

I would like at this time, to provide you with a few 
examples of why we currently need an alternative mechanism to 
increase fresh fruits and vegetables in school lunch programs: 

1. One school district was recently informed that their 
bonus commodities -- fresh apples, pears and grapefruits -- would 
arrive at the distributors the week before spring break. This 
would not have happened had the school purchased these 
commodities with a CLOC. The prospect of spoilage was great 
under these circumstances. 

2. A school in California received fresh oranges, of which 
more than 50 percent had to be discarded due to molding. 

3 . A school district in Pennsylvania received cases of 
fresh pears (40 lbs per case) and found that there was not one 
usable whole fruit in the case. This same school also received 
potatoes which were unusable but for which they had to pay a 
delivery fee and then dispose of them -- and still had them 
charged against their allocation. 

4. A school district in Nevada shared with me their 
experience with fresh tomatoes under the current commodity 
system. In summary, to use the amount of tomatoes this 
particular district was allocated would have required them to 
serve one-half cup of fresh tomatoes to every child every day for 



59 



a two-week period. Since this was not acceptable and they could 
not accept part of what was offered, they decided not to accept 
the product at all. 

5. A school district in Pennsylvania received a shipment of 
apples in 1994 which had no taste and most of which were 
discarded by students. If we want to improve the nutrition 
quality of school meals, we have to serve items students will 
eat . 

These are but a few of the examples I have received from 
school districts with respect to problems with the current 
commodity system and the distribution of fresh fruits and 
vegetables . 

I would like to point out, however, that the legislation is 
optional and schools do not have to participate. In addition, 
the provision in H.R. 8 only allows schools to use 10 percent of 
the 14 cents per meal in entitlement commodities to purchase 
fresh fruits and vegetables. Since approximately 20 percent of 
the 14 cents per meal is in the form of fruits and vegetables, 
this would only permit schools to use one-half of the normal 
amount for fresh, allowing for the receipt of additional fruits 
and vegetables in canned or frozen form. 

Also, it would not be my intention that schools use a fresh 
fruit and vegetable CLOC to replace funds they are already 
spending on such commodities. Rather, the goal of the provision 
is to increase the amount of fresh fruits and vegetables in the 



60 



school lunch program. This option would also be administered 
through the current state commodity distribution system. 

Finally, Mr. Chairman, H.R. 8 provides for a one-state CLOC 
demonstration to answer for once and for all the question of 
whether or not CLOC can effectively remove commodities from the 
marketplace at a rate comparable to the current commodity 
distribution system. For years, we have heard the criticism that 
the current project is not large enough to provide us with 
definitive information as to the effectiveness of CLOC. Yet, 
there has been opposition to expanding the current demonstration 
project to include additional sites. This provision of H.R. 8 
would only take effect if a state was able to obtain approval of 
80 percent of local school food service authorities to undertake 
the demonstration project. It would be operated by the commodity 
distribution entity within the state and would only be in effect 
for the authorization period of H.R. 8. 

Mr. Chairman, I understand the Department of Agriculture is 
opposed to any provisions dealing with the inclusion of cash/CLOC 
in H.R. 8. However, one of their arguments, that their 
purchasing power is greater, may not be legitimate in some 
instances. I have heard from school districts in some parts of 
the United States that while USDA may purchase commodities at 
lower prices, they end up costing more once they have been 
processed into usable form -- and often have higher fat content 
than commodities purchased directly from vendors. Examples 
provided by the Michigan School Food Service Association include 



61 



breaded chicken nuggets, which were found to be 8 grams higher in 
fat content when purchased through the commodity warehouse than 
through a vendor. In addition, the Michigan School Food Service 
Association has found that breakfast egg biscuits and fruit pies 
cost more when purchased through the commodity warehouse than 
through a vendor. Breakfast egg biscuits cost 33 cents each when 
purchased through the warehouse and 23 cents each when purchased 
from a vendor. Fruit pies cost 19 cents each when purchased 
through a warehouse and 16 cents when purchased through a vendor. 
From Pennsylvania, I received the following examples. The end 
cost of chicken nuggets using USDA commodities was $1.83 per 
pound, while the cost from a vendor was $1.68 per pound. The 
cost of turkey roll using USDA commodities was $1.42 per pound, 
while the cost from a vendor was $1.37. The cost of wafer steak 
using USDA commodities was $2.05 per pound, while the cost from a 
vendor was $1.62 and, finally, the cost of hamburger patties was 
$1.90 per pound while the cost from a vendor was $1.40. In times 
when schools are closely watching their budgets, this certainly 
is another area which must be addressed in any commodity reform 
proposal . 

Mr. Chairman, I understand that Barry Shutt from the 
Pennsylvania Department of Agriculture, Bureau of Donated Food, 
is going to testify later concerning their views on the CLOC 
provisions in H.R. 8. I would like to point out that in the 
audience we have representatives from the Pennsylvania School 
Food Service Association. Their views may differ somewhat from 

10 



62 



Mr. Shutt's and you may want to ask them how they feel about the 
current commodity distribution system so you have a clear picture 
of how both the beneficiaries of the system feel about its 
effectiveness . 

As I indicated earlier, I want the system to help both 
school children and the agriculture community. However, as you 
can see there are problems which have the effect of turning 
recipients away from the current commodity distribution program. 
When this happens, we all lose. 

The CLOC amendments contained in H.R. 8 will help address 
these problems in the short term and I assure you I will work 
with you over the next few years to improve the current system so 
that each and every school participating in the national school 
lunch system is more than willing to participate. 

I thank you again for allowing me to testify before your 
Committee and look forward to working with you in the future. 



11 



63 



TESTIMONY OF ELLEN HAAS 

ASSISTANT SECRETARY 

FOOD AND CONSUMER SERVICES 

U.S. DEPARTMENT OF AGRICULTURE 

BEFORE THE SUBCOMMITTEE ON DEPARTMENT OPERATIONS 

AND NUTRITION 

COMMITTEE ON AGRICULTURE 

U.S. HOUSE OF REPRESENTATIVES 

JUNE 9, 1994 



I am delighted today to be here to discuss USDA's vision for the future of the 
nation's school meal programs and how the commodity programs play an important role in 
advancing our goals for healthy school meals. 

This week, the Department announced a comprehensive, integrated four-point 
framework for action to fundamentally update and continuously improve school meals. 
Central to this initiative is maintaining the integrity of the commodity program, while making 
needed improvements. 

Our School Meals Initiative has one simple goal: healthier children. 

President Harry S. Truman established the National School Lunch Program in 1946 in 
response to the young men who wanted to be soldiers during World War II, but suffered 
from malnutrition. The program was defined then as "a measure of national security, to 
safeguard the health and well-being of the Nation's children and to encourage the domestic 
consumption of nutritious agricultural commodities." 



64 

The mandate has not changed, but the science of nutrition has. 

And our programs have not kept up. 

With our School Meals Initiative for Healthy Children, we are updating the nutrition 
standards in our school meal programs to meet health objectives. Our four-point plan 
includes regulatory changes and departmental actions: 

1. EATING FOR HEALTH: Nutrition standards will be updated to include the 
Dietary Guidelines for Americans by the 1998 school year, 

2. MAKING FOOD CHOICES: We will introduce new ways to appeal to 
children's taste and promote their health, through nutrition education, training 
and technical assistance, 

3. MAXIMIZING RESOURCES: By marshalling available resources and 
strengthening partnerships with state and local cooperators, USDA will 
improve the nutritional profile of commodities, 

4. MANAGING FOR THE FUTURE: We will reduce paperwork burdens by 
using technology, streamlining administrative procedures, and emphasizing 
flexibility. 



65 



Mr. Chairman, updating the nutrition standards for school meals is our national health 
responsibility. Moreover, our proposed changes to the National School Lunch and School 
Breakfast Programs reinforce President Clinton's priorities for health care reform and 
government reinvention. 

In the National School Lunch Program (NSLP), federally donated commodities 
obtained through the operation of the price support provisions of title II of the Agricultural 
Act of 1949 (the 1949 Act) and through the surplus removal provision of section 32 of the 
Act of August 24, 1935 (section 3 and section 6(a)) of the National School Lunch Act 
(NSLA) represent almost 20 percent of the food purchased. The meal served to more than 
25 million students in more than 92,000 schools each day is the result of a cooperative effort 
between the farmer/producer, USD A, and school food authorities. 

As we change our school meals to promote the health of children, the integrity and 
continued improvement of our commodity programs is central to achieving our goals. The 
Department, therefore, feels that the reauthorization or expansion of cash in lieu of 
commodity demonstration (CLOC) demonstration project is unnecessary. 

Through our School Meals Initiative for Healthy Children, we are taking several 
important steps to improve the commodities obtained through the commodity purchases. 



66 



Working together, Food and Nutrition Service (FNS), Agriculture Marketing Service 
(AMS), and Agriculture Stabilization and Conservation Service (ASCS) are part of a recently 
formed USDA Commodity Improvement Council. The Council will promote the health of 
school children by improving the nutritional profile of USDA commodity offerings, while 
maintaining the Department's mandated support of domestic agricultural commodities and 
producers under the 1949 Act and Section 32. The Council will enhance coordination among 
the three agencies within USDA responsible for obtaining and using these commodities. The 
Department is committed to a systematic, comprehensive review of current commodity 
product specifications. 

By encouraging regional and seasonal purchases, we will promote local agriculture 
production, and forge new links with local farmers. 

And I am especially pleased to say that, as part of our new initiative, USDA will 
provide nutrition labeling on food including our commodity products and institutional 
packages, that go to schools. This information will provide needed information for food 
service professionals as they plan more healthful menus. 

Beyond those specifics proposed in our School Meals Initiative for Healthy Children, 
the Department has already taken steps to improve the nutritional profile of selected 
commodities offered to schools. 



67 



We are particularly proud of the reductions we are achieving in fat and sodium. For 
example, bulk ground beef is currently available with an average fat content of 19 percent -- 
as compared with the commercially available product which averages around 30 percent fat. 
Ground beef patties with a fat content of 10 percent are also being offered to schools. For 
example, the variety of poultry products has been expanded and now includes frozen ground 
turkey, turkey sausage, and turkey burgers with an average fat content of 1 1 percent, and 
low-fat, low-skin all-meat chicken nuggets and chicken patties. 

And as this committee knows, Mr. Chairman, last year the Department doubled the 
amount of fresh fruits and vegetables offered to schools along with increasing the variety 
available. 

Currently, the Department is testing low-fat mozzarella cheese with a 7 and 10 
percent fat content as compared with a 20 and 25 percent fat in regular mozzarella. 
Reduced-fat cheddar cheese with a fat content 40 percent lower than regular cheddar is being 
tested in Indiana schools. Reduced-fat salad dressing has also been tested, and preliminary 
results are being analyzed. 

Using the Department's purchasing power, we believe that we can encourage the 
market to develop new products that will provide healthier food to schools. New products 
can be available sooner, and potentially at lower cost to consumers, because of the 
Department's buying power. 



68 



Mr. Chairman, in your invitation to me you asked about our views on the Commodity 
Letter of Credit provisions of H.R. 8. These provisions extend and may greatly expand the 
Commodity Letter of Credit Pilot Program. 

As I said earlier, I firmly believe that because of the many improvements that we 
have made — and are continuing to make - in the commodities made available to schools 
under section 32 and the 1949 Act, there is no reason to extend CLOC/Cash. Indeed, it is 
important that we preserve the integrity of these programs. 

The CLOC pilot program began in response to complaints in the 1970's that the 
commodity system was not keeping pace with the needs of the school lunch program. CLOC 
funds were diverted from the funds available under section 32 and the NSLA. 

One of the primary goals of the 1949 Act and section 32 commodity programs is to 
support the price of U.S. agriculture commodities by means of price support operations and 
removal of surplus commodities. The positive market effect of these commodity programs is 
most important to retain. The original CLOC evaluation demonstrated that the food value of 
the commodities offered by the Department was worth two to three percent more than food 
purchased locally with CLOC funds, in part because schools purchased more highly 
processed items with their CLOC vouchers. 



69 



The market impact of agricultural price support and surplus removal programs is 
likely to be more pronounced where the quantity of product removed from the market 
represents a substantial portion of the total market for that commodity. 

Also, very important to the Department is the domestic origin of food purchases, a 
central guiding principle of these commodity purchase programs. When USDA supports the 
price of U.S. agricultural commodities under its price support and surplus removal 
operations, it acquires commodities directly from American producers and processors and 
can ensure that the end product is a domestic agricultural product. Both GAO and USDA 
found that there is no such assurance that end products are domestic in the CLOC program. 

The Department has run the CLOC Pilot programs for nearly 14 years in 25 of the 
nearly 20,000 school districts in the United States. During that time it has conducted two 
evaluations of the system, and the pilot projects have been extended 6 times through 
legislative action. The Department has spent over $8 million to administer and evaluate the 
projects in that time. 

H.R. 8, the Healthy Meals for Healthy Americans Act of 1994, which was recently 
reported by the House Committee on Education and Labor, provides for permanent 
authorization of the CLOC pilot/demonstration projects. The Department sees no additional 
information being gained from the current pilot systems, and believes that extending them 



70 

will continue the administrative costs borne by USDA to administer the projects without any 
additional benefit to our agriculture producers or school partners. 

Secondly, H.R. 8, as reported, would add a statewide demonstration project in a State 
where at least 80 percent of the School Food Authorities agree to participate. A statewide 
demonstration has not been attempted previously, but implications for state administration 
have been addressed in previous studies. It is unlikely that a one-state study would be 
effective at yielding results that could be extrapolated for nationwide policy 
recommendations. In addition, start-up and implementation costs would be considerable, and 
funding for these costs are not specifically authorized by the bill. 

Finally, H.R. 8 allows all schools to use CLOC for 10 percent of their entitlement 
commodities for the purchase of fresh produce. This provision would allow for a nationwide 
optional CLOC system that would be a substantial disruption to the current administration of 
the commodity programs, and it is not clear that the provision would accomplish its goal of 
assisting schools to increase the offerings of fresh produce in their meal programs. 

The amount of funds proposed to be set aside for new CLOC's amounts to about 2 
percent of total food acquisitions. The most recent data on this topic indicates that fresh 
produce acquisitions amount to about 4 percent of all food served. If school food authorities 
are given such a letter of credit at the beginning of the school year to purchase any fresh 



71 



fruits and/or vegetables, the letters of credit would likely displace local funds used to 
purchase fresh foods rather than increasing fresh offerings. 

The paperwork to administer such a system would be substantial. At the same time a 
nationwide optional CLOC system would produce substantial disruption and administrative 
complications and paperwork. Dual systems of administration would be needed, but it would 
not be possible to determine with any certainty how much food the Department should buy, 
and how much would be purchased through CLOCs. 

In short, I believe that, through all of our efforts, the Department is better-suited than 
school systems to align the twin objectives of promoting nutrition and market stabilization. 

In closing, Mr. Chairman, let me say that we face a historic challenge to improve our 
school meals program, and we are responding to that challenge with our School Meals 
Initiative for Healthy Children. As we make these changes, we must also take our 
commodity programs into the next century. By preserving the viability of our commodity 
programs, we have the opportunity to promote the health of children, and simultaneously 
benefit the American farmer. Under Secretary Espy's leadership, we are committed to doing 
both. 

I will be pleased to answer any questions you or members of the Subcommittee might 
have. 



72 



Testimony of the 

American School Food Service Association 

before the 

Committee on Agriculture 

U.S. House of Representatives 

June 9, 1994 

Mr. Chairman, Members of the Committee, I am delighted to represent the American School 

Food Service Association here today. I am Marilyn Hurt, supervisor of school nutrition programs for 

LaCrosse, Wise, and chair of ASFSA's Public Policy and Legislative Committee. 

The Commodity Distribution Program has been a part of the school lunch program since the 
beginning. Indeed, USDA was distributing commodities to school food programs prior to the 
enactment of the National School Lunch Act in 1946. 

On March 8, 1980 Congressman Bill Ford and Congressman Bill Goodling introduced H.R. 
6841 to provide for the issuance of commodity letters of credit (CLOC) in lieu of the purchase and 
distribution of USDA commodities. This was the first "CLOC" legislation and it was referred jointly 
to the Committees on Education and Labor and Agriculture. The Committee on Education and Labor 
rejected H.R. 6841 on a tie vote. Out of deference to that vote, however, later that same year, on 
December 2, 1980 the Congress appropriated $1,975 million to conduct a three year pilot project in 
60 school districts to test all cash assistance and the commodity letter of credit program. 

The USDA CLOC pilot program continues today as a result of several congressional 
extensions in the pilot program.- Throughout this entire period of time-the American School Food 
Service Association continued to support, and supports today, the USDA Commodity Distribution 
Program. 



1 



73 



Approximately 20 percent of the federal support for the National School Lunch Program is in 
the form of USDA commodities. The commodities are an important contribution to the economic 
well being of local school lunch and breakfast programs throughout the country. In addition to the 14 
cents per meal in entitlement commodities we receive bonus commodities, when they are available. 
During the mid 1980's, when our program suffered drastic budget cuts, we relied heavily on ample 
bonus commodities to reduce our food costs and provide economic stability to our programs. 

In addition to the economic support provided by the Commodity Distribution Program, 
commodities have been a part of the historical roots of the school lunch program, one of the stated 
purposes of the program, and a part of the political base of the school lunch program. Section 2 of 
the National School Lunch Act, the declaration of policy section, provides that "it is the policy of 
Congress, as a measure of national security, to safeguard the health and well being of the nation's 
children and to encourage the domestic consumption of nutritious agriculture commodities — " 
(emphasis added). It is interesting to note that in the 48 year history of the National School Lunch 
Act, the statute has been amended numerous times. Section 2, however, has never been amended and 
the stated policy of the school lunch program remains today as it was enacted on June 4, 1946. 

Some might argue that from an agricultural perspective, the importance of the school lunch 
program is greater today than it was in earlier years. As you know, a number of agricultural 
organizations wrote to President Clinton on March 14, 1994 urging his support for an increase in 
commodity purchases for domestic distribution. Their thesis was that under GATT, domestic 
agriculture price supports will-be lowered. -However, GATT allows-the-Dnited States (and all other 
parties to the treaty) to continue to support domestic agriculture through the purchase and distribution 
of domestically produced commodities. 



74 



One of the specific CLOC provisions in H.R. 8, a new idea, would be to allow schools to use 
10 percent of their commodity entitlement for CLOCs for fresh fruits and vegetables. ASFSA is 
committed to the Dietary Guidelines for Americans and has endorsed all three versions, including the 
one released in 1990, which for the first time applied to children. 

We are concerned however, about this provision because it tells us how to achieve the goal of 
meeting the dietary guidelines rather than focus on the goal itself. This provision could bring more 
paperwork to a program that has too much already. The administrative costs for this very small 
provision would not be a wise use of our limited resources. 

Indeed, one of our major concerns with CLOC is the administrative complexity. Currently, 
the CLOC pilot programs are administered by Virginia Polytechnic Institute, which has been able to 
provide all of the pilots with significant personal attention. That kind of hands-on assistance would 
not be available if there were thousands of CLOCs, circulating around the country for different 
products and with different delivery times. There is a potential that this could create additional 
administrative costs. 

One of the major goals of H.R. 8 is to lower the administrative burdens and costs suffered by 
the school lunch and breakfast programs. The Education and Labor Committee included many strong 
provisions to reduce paperwork and increase flexibility in H.R. 8. We fear that the fruit and 
vegetable CLOC provision would go in the opposite direction. 



75 



It is equally very important to point out that those schools which have experimented with the 
CLOC pilot have, by and large, been satisfied with the program. Indeed, some CLOC sites are more 
than satisfied. They believe that CLOC is far superior to the commodity program. Under CLOC, 
commodities do not have to be stored and schools don't have to worry about whether USDA will 
deliver the commodities on time. We also appreciate and respect the fact that the Members of the 
House Education and Labor Committee, who are strong and committed allies of the School Lunch and 
Breakfast Programs, feel that CLOC would work better from a local school perspective. 

In many ways, Mr. Chairman, the CLOC issue represents a conflict between two important, 
yet different, policy objectives. ASFSA will almost always support giving local school food service 
administrators greater flexibility and more options so that we might decide for ourselves how best to 
run our local programs. 

In the area of CLOC and commodities, however, the goal of local flexibility comes up against 
the national policy objective of helping domestic agriculture. If the Congress were to terminate the 
Commodity Distribution Program in favor of either cash or CLOC it would be a fair question to ask 
whether the school lunch and breakfast programs should remain at the Department of Agriculture. It 
is not my intention to answer that question today, but rather to recognize the larger policy 
implications of terminating the Commodity Distribution Program. 

Further, if we are going to sever our link with agriculture, we should also ask whether or not 
we should move beyond CLOC and go straight -to cash. Since 1981 -when the CLOC pilots started, 
we have seen federal support for the school lunch programs slashed and the regulatory burden 
increased. If Congress were to decide that the school lunch program was no longer important as an 



76 

agricultural program, then perhaps we should not impose the administrative burden of running the 
CLOC program, and should just give school districts cash. 

Mr. Chairman, we have been talking about CLOC and cash and commodity reform for more 
than a decade. We actively supported the Commodity Distribution Reform Act of 1987, which 
improved the commodity program. The commodity program is far superior today to what it was in 
the 80s. 

Our Association supports the national policy objective of helping domestic agriculture and 
believes we can work with Congress and USDA to continue to improve the commodity program in 
ways that will benefit both agriculture and the nation's children. 

I appreciate the opportunity to be here with you this afternoon. I will be delighted to answer 
any questions that you may have. 



77 



Testimony of the 

American Commodity Distribution Association 

before the 

House Committee on Agriculture 

Subcommittee on Department Operations and Nutrition 

June 9, 1994 

Good afternoon, Mr. Chairman, my name is Catherine Miller, and 
I am President of the American Commodity Distribution Association 
(ADCA) . I am also Chief of the New York Bureau of Government 
Donated Foods, which distributes federally donated commodities 
through eight of the Department of Agriculture's food programs. I 
appreciate the opportunity to testify before the Committee on the 
Commodity Letter of Credit (CLOC) provisions of H.R. 8, the Child 
Nutrition Reauthorization bill. 

The American Commodity Distribution Association is a non- 
profit professional association whose members include state and 
territory commodity distribution agencies, agricultural 
organizations, food processors, warehouses, food banks, commercial 
distributors and transportation companies, recipient agencies, and 
individuals. We work closely with our members, the Department of 
Agriculture, allied organizations, and various hunger relief and 
advocacy groups to improve the Commodity Distribution Program and 
consistently meet the changing needs of its recipients. 

Mr. Chairman, ACDA's position on the CLOC program is simple — 
we oppose any extension or expansion of the CLOC program, and we 
oppose the CLOC provisions included in H.R. 8. It is our opinion 
that the current pilot projects should return to the Commodity 
Distribution Program when the authority for these pilots expires 
later this year. 

The CLOC provisions of H.R. 8 would permanently reauthorize 
the existing cash and CLOC pilot projects, establish one state-wide 
CLOC pilot if requested by eighty percent of the schools, and allow 
schools to receive ten percent of their commodity entitlement as a 
CLOC for fresh fruits and vegetables. Our opposition to these 
provisions does not mean that we do not support the goal of 
increasing the use of fruits and vegetables in the School Lunch 
Program. On the contrary, we support that goal. We simply believe 
that a specialized CLOC for fresh fruits and vegetables is neither 
the most effective nor the most efficient means of achieving this 
goal. 

The CLOC pilots characterize what we hear all too often about 
government programs, especially agriculture programs: that a pilot 
program is nearly impossible to eliminate after it is initiated. 
As you know, the CLOC pilot projects were first commissioned by the 
Fiscal Year 1981 Agriculture Appropriations bill, and have been 
extended several times. The authority to operate these pilots will 



78 



expire this year unless it is extended again. We believe it is 
time for the sun to set on these pilots. 

The Commodity Distribution Program is better suited to meet 
the needs of schools and American agriculture than the CLOC 
program. The Commodity Distribution was established in 1935 to 
serve a dual purpose: to provide nutritional assistance to children 
and help provide market stability for the purchased commodities. 
Because of this dual role, the Commodity Distribution Program has 
the unique ability to spend and reap a benefit from the same dollar 
twice. Once when it purchases commodities, and a second time when 
these commodities are donated to schools and other outlets. 

Last month, ACDA and sixteen other agricultural groups wrote 
to Secretary Espy outlining our concerns about the fate of the CLOC 
program. This letter outlined the basis of ACDA's opposition to 
the CLOC program, which is very similar to USDA's rationale for 
opposing this program. 

We are pleased that Secretary Espy has taken a position 
opposing the CLOC pilots as did his predecessor, Secretary Madigan. 
The Department's official opposition to the CLOC pilots was 
included in its analysis of H.R. 8, which was sent to the House 
Education and Labor Committee on May 16. 

I would like to summarize briefly our reasons for opposing the 
CLOC program and the CLOC provisions of H.R. 8: 

1. The Commodity Distribution Program purchases products at 
the lowest possible price and in such large quantities that it 
provides economies of scale the CLOC program simply cannot offer. 
Coupled with the Department's massive buying power, these purchases 
guarantee that federal money is spent as economically as possible. 
CLOC purchases, being at the consumer end of the market, are more 
costly, and cannot possibly match USDA's buying power, even when 
made by large school districts. 

2. The Department's purchases have a significant stabilizing 
effect on the agricultural market. Any expansion of the CLOC 
program would hinder not only the Department's ability to provide 
nutritious products to the child nutrition programs, but also its 
ability to stabilize agricultural markets. 

Further, the Commodity Distribution Program will be of even 
more importance to American agriculture after implementing 
legislation for the General Agreement on Tariffs and Trade (GATT) 
is passed. GATT would restrict the Department's ability to support 
American agriculture and protect the market from unavoidable price 
fluctuations. However, GATT specifically exempts "Green Box" 
programs from being defined as trade barriers. "Green Box" 
programs include several domestic food assistance programs served 
by the Commodity Distribution Program, such as The Emergency Food 

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79 



Assistance Program (TEFAP) . Indeed, funding levels for these 
programs should be reviewed and possibly increased if Congress 
wants to maintain the Department's ability to stabilize markets in 
a manner that is acceptable under GATT. 

3. Rural areas and small schools districts would be at an 
economic disadvantage by using CLOC. The Commodity Distribution 
Program provides products and services at equal costs to school 
districts regardless of size and location. Small rural school 
districts in every state receive products at the same value as the 
larger cities in the state. Under CLOC, larger cities would 
benefit from lower transportation costs and leveraged buying power, 
while the smaller districts would be forced to pay much more for 
comparable services. 

Despite its reputation as an urban state, New York has many 
rural areas, and some are so small and remote that schools have 
difficulty identifying vendors to serve them. Providing such 
districts with a CLOC would be of no benefit, and would only serve 
to increase their frustration. 

4. The CLOC program is an additional administrative expense 
for the School Lunch Program. The current CLOC pilots rely on a 
duplicitous administrative structure that diminishes the funds of 
the School Lunch Program as a whole. The Department estimates that 
expanding the CLOC program would incur additional costs. If a 
state wide CLOC is created, as proposed by H.R. 8, the Department 
estimates the program would cost up to $2 million to operate. This 
expense would be an unnecessary drain on the Department's 
resources, and is money that could be better spent elsewhere. As 
we continually try to reduce costly administrative burdens, this is 
a step in the wrong direction. 

5. The School Lunch Program is the backbone of the Commodity 
Distribution Program. If the CLOC program is expanded and more 
schools use a CLOC option, the infrastructure provided by the 
Commodity Distribution Program would be weakened significantly. If 
this does happen, we need to ask ourselves: What will happen to 
the smaller programs served by the Commodity Distribution Program? 
TEFAP, the Soup Kitchens and Food Banks program, the Food 
Distribution Program for Indian Reservations, and the Department's 
disaster assistance efforts would be weakened by the expansion of 
the CLOC program. Disaster assistance is a perfect example. As we 
have learned in recent years, commodities in storage at recipient 
agencies or in warehouses for schools are often the first response 
to natural disasters. 

6. The Commodity Distribution Program can guarantee that the 
purchased commodities are domestically produced, but the CLOC 
program cannot make a similar guarantee. Although CLOC purchases 
are required to follow the same domestic content policy, attempts 
to assure domestic content are burdensome, costly, and uncertain. 

-3- 



80 



In a time when we are attempting to reduce the paperwork burden on 
schools, the CLOC program would simply provide another avenue for 
reviews, verifications, and undue emphasis on the administrative 
aspects of the program to the detriment of the real focus, feeding 
hungry children. 

Program Improvements 

In 1987, Congress passed the "Commodity Distribution Reform 
Act and WIC Amendments of 1987", Public Law 100-237. This law 
brought about monumental improvements in the program, both by USDA 
and by state distributing agents, like myself. One significant 
improvement was in the area of quality. Commodities purchased by 
USDA have shown significant improvement in recent years in terms of 
their nutritional qualities. Fat, sodium and sugar are routinely 
reviewed, and our schools find that USDA commodities form the basis 
for sound, nutritional meals for children. Many schools have told 
me that it is not possible for them to purchase the same quality 
that the Department provides, and their costs would be higher even 
when purchasing products of lesser quality. Today, foods purchased 
by USDA are universally recognized as being the best money can buy. 
Not only has the nutritional profile and variety of products 
improved, but new packaging better meets the needs of recipients 
and the delivery system has become more timely and responsive. 

Another major improvement was the creation of a National 
Advisory Council on Commodity Distribution. The Advisory Council 
brought together representatives of all groups served by the 
program to continuously identify additional areas where services 
can be improved. As a result of the Advisory Committee's 
initiatives, recipients, especially school districts, are more than 
satisfied with the operation of the current program. 

Summary 

Mr. Chairman, ACDA believes that the Commodity Distribution 
Program is the most economical system for providing schools with 
the nutritious products they need. In recent years, the 
cooperative effort between the Department and the agricultural 
community has improved the distribution program and its products to 
better meet the demands of recipients. These changes have helped 
and will continue to help the program meet its traditional goals of 
providing nutritional assistance to schools and support of American 
agriculture — two goals the CLOC program can never hope to 
realize. 

The Commodity Distribution Program still works, and there is 
no question it will continue to evolve and improve its services, 
even with the implementation of the Dietary Guidlines that were 
announced yesterday. The Dietary Guidelines are an important part 
of the Department's mission, and ACDA, ASFSA, and many other groups 
support these Guidelines. Some would argue that the Commodity 

-4- 



81 



Distribution Program is incapable of meeting these goals, but that 
simply is not true. The Commodity Distribution Program has proven 
that it is capable of changing to meet the evolving needs of its 
recipients, and is well suited to deliver products that adhere to 
the dietary guidlines. The Commodity Distribution Program can and 
will meet any challenge that the implementation of these guidelines 
present. 

Thank you again for the opportunity to testify. I would be 
happy to answer any questions you may have. 



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82 



STATEMENT 
OF 
PAT HOLSTEIN 
FOR THE 
COMMITTEE ON AGRICULTURE 
UNITED STATES HOUSE OF REPRESENTATIVES 
ON CLOC 
AN ALTERNATIVE TO COMMODITIES 
JUNE 9, 1994 

Mr. Chairman, Members of the Committee, my name is Pat 
Holstein and for the past 15 years I have been Food Service 
Director of Lexington School District 3 in Batesburg- 
Leesville, SC. Batesburg-Leesville is located near the 
center of the state about 35 miles south of Columbia, the 
state capital. This is a rural area and as far as 
agriculture goes, the main money crop is peaches. Lexington 
District 3 is a small school district with only 2400 
students and 4 schools. An average of 1850 students eat 
lunch each day and 725 eat breakfast. We serve 4 and 5 year 
old kindergarteners as well as grades 1-12. 

Fifteen years ago commodities came in without a 
schedule that I could determine. They simply arrived, and 
the cafeterias had to find some way to store them. Then the 
cafeteria manager had to find some way to prepare them so 
the kids would eat them. Most of these commodities were in 
a form that was very labor intensive. The thing that really 
concerned me about commodities was the attitude the 
cafeteria workers had. They felt they were "free", they 
were very careless in the use of them, wasted them, and 
complained constantly about them. They never thought of 
them as "costing money." 

When I was asked by South Carolina's commodity chief, 
Ramon Aycock, at the time, to take part in the CASH\CLOC 
Pilot Study, I felt it would be a wonderful challenge and 
might help the food service program out financially. I knew 
the cafeteria workers would think of CLOC food as "real" 
food and be more careful in its use. 

I was right on both counts . The CLOC money is sent 
quarterly, as most of you know. In other words instead of 
having that 14 cents a meal tied up in storage, the district 
has up-front money to buy food as USDA does, but in a form 
useable right then. For instance, instead of whoLe turkeys, 
turkey rolls or roasts, the district buys a lot of ground 
turkey. It's cheap, in a useable form, and low in fat. 

Several years ago, I was teaching a Red Cross course 
called "Better Eating For Better Health" to the cafeteria 
managers. This course was all about cutting the fat, sugar, 
and salt in the diet. As a result of this six week class, 
we began to change our recipes to reflect these "new" ideas. 
Without saying one thing to the students or teachers, we did 
a few simple things. 

1. Reduced the sugar by 1/3 in foods and began 
offering more fresh fruits as desserts. 

2 . Reduced the salt in foods and removed salt shakers 
from tables . 

3. Began using more fresh and frozen vegetables. 

When USDA came out with the latest food pyramid and 
suggested keeping the fat to 30% of the calories in our 
lunch menus, we were already doing this in our cafeterias. 

Approximately 15% of the money spent on food in our 
cafeterias now is for fresh fruits and vegetables. With the 
CLOCs received we can buy fresh, frozen, or canned foods. 
The favorite vegetable in our schools is BROCCOLI--cooked or 
fresh! 



83 



Children eat at school what they are used to eating at 
home, so we try to educate the parents in nutrition as well 
as the children by publishing menus in the local and State 
Newspaper. These menus have been analyzed by some software 
called Nutrikids, which has all the USDA recipes and 
products and the nutritional data on them. Monthly menus 
are sent home with each child. 

What does all this have to do with CLOC? 

1. The food, both CLOC and purchased is bid. The CLOC 
food gives me more buying power. The food costs for our 
district have not increased in several years, which keeps 
our paid lunch price at $1.00 and $1.15 and $.50 for 
breakfast. To have commodities shipped from the warehouse to 
a cafeteria costs $1.75 a case or bag. With the food I bid, 
this is included in the cost. When this $1.75 is added to 
the cost of the commodity--my price is almost always as 
cheap or cheaper. 

2. Financially, Lexington District 3 Food Service stays 
in the black. We're able to buy equipment and keep our 
cafeterias attractive. 

3. We are meeting the dietary guidelines. 

4. We have a high participation in breakfast and lunch 
because we can offer foods the kids will eat. 

5. Our food inventory is kept at a reasonable level. 
At the end of the year, we do not have a large food 
inventory to worry about like we did when we had 
commodities. Even with all the improvements made in 

commodities, these commodities still come in at the very end 
of the school year and have to be stored. 

When Hurricane Hugo visited our state a few years ago, 
we thought our area of the state would be affected. If it 
had been, there was enough food available in our cafeterias 
to feed 2000 lunches and 1000 breakfasts a day for 7 days. 
With commodities there would have been a freezer, cooler and 
storeroom full of food--but not in a form that could be 
prepared easily. 

Yes, we continue to get bonus commodities, but every 
year they dwindle. Yes, I understand from other Food 
Service directors that commodities have improved in the way 
they are packaged and in acceptability. I think one "reason 
for these improvements is the CASH\CLOC Pilot Program. I 
realize we've been a thorn in your side at times, but maybe 
USDA needed that I 

If we are capable of buying over 90% of the food for 
our cafeterias, why not buy 100%? Reproduced below are two 
charts showing Lexington District 3's expenses and income 
and the important part that CLOC plays . 



84 



Food Service 93 — 94 



Q[i;<f?Q[ or Oto,,,i,.o0ili.o (0.5%) 



ipsipSV (6i.n7„) 




Student ^imclitu (paid and reduced) ( 



Student 3{lrealifast (paid mid 
JVdult Jprealttaat (0.1%) 

gi0..ll Jf....r1,eo (3.4%) 

■ltd lutirli U.'i 

J\f incellmteoiin (couutjt & state s 



Food Service 93 — 94 



S3oo.ooo.oa 



£250.000.00 



X200.00O.00 



Snso.ooo.oo- 



Snoo.ooo.oo 



S50, 000.00 



]£xi>euse* 



So.ao 





If ood QJ^C^Ct B*o 4£omntoditji ?£nutpineut <9ther!*{ermXltijti kt Ind Supplies 



85 



It is important to keep the CLOC/Cash option in H.R. 8, 
even though it is included in H.R. 4221. This pilot program 
deserves to be permanently authorized. It is an improved 
program and deserves special consideration. It is a 
wonderful way for a state to make comparisons on food costs 
and acceptability of school lunches and breakfasts of CLOC 
schools as compared to Commodity schools. Listed below are 
several more reasons for permanent authorizing the CLOC/Cash 
program. 

1 . the continuation of the program reguires no 
additional funding. 

2 . CLOC has been one of the greatest impact on School 
Food Service programs particularly with increased 
participation, more flexibility, improved nutritional 
awareness and provide children with acceptable meals with a 
minimum waste. The need for food to come in different forms 
has been tremendous. Our children receive the benefits. 

3 . The CLOC program must spend their vouchers at the 
same time the USDA is making their purchases -- this 
relieves surpluses of specific farm products and meets price 
support goals. Political ties can be far more reaching when 
we purchase locally since we affect more farmers and 
industries than when USDA purchases the food. CLOC program 
still meets the farm support objectives and worked much 
better for schools. 

4. Since we bid, we had competitive prices on our CLOC 
purchases and they were delivered at the same time as our 
groceries without additional expense. We were able to 
coordinate deliveries with menus, thereby giving us security 
in planning. This saved on warehousing and storage. 

5. In some cases we were able to serve foods purchased 
with CLOC funds before commodity schools were notified they 
were going to receive it. This has been prove. 

Our concerns, yours and mine, have to be for the good 
of the program. The study has proven, without a doubt, that 
CLOC is a viable alternative to the present commodity 
system. Please allow us the option of CLOC and extend that 
option nationwide. 

We are deeply grateful of your support for Child 
Nutrition Programs. Please consider the positive effects of 
the CLOC program. We have tremendous respect for the 
Agriculture committee and trust you will consider what is 
best for the National School Lunch Program. 

The ease of the CLOC program and adaptability to our 
needs warrant a hearty stamp of approval. 



86 



Commodity Distribution Coalition 



Statement of the 
COMMODITY DISTRIBUTION COALITION 

Before the 
Subcomlttee on Department Operations and Nutrition 

of the 

Committee on Agriculture 

U.S. House of Representatives 

on the 

"Commodity Letter of Credit" provisions of H.R 8 

June 9, 1994 



Presented by: 

Richard Pasco 

Vice President of Government Affairs 

National Pork Producers Council 



Joel I 

National Turkey Federation 
(703)435-7208 

i ^lpjt CuSCQtDB 

National Peanut Council 
(703)838-9500 

Judy Giflord 

National Milk Producers Federation 

(703) 243-6111 

Beth Johnson 

National Cattlemen's Association 
(202) 347-0228 



STEERING COMMITTEE 



American Farm Bureau Federation 
(202)484-3600 



American Meat Institute 
(703)841-2400 

Olsson. Frank and Weeda. P.C. 
(202)789-1212 

Christine Nelson 
United Egg Producers 
(202) 842-2345 



National Pork Producers Council 
(202)554-3600 

Allen Rlchsrd 

National Farmers Union 

(202)554-1600 

Barbara Spsnglor 

National Association of State 

Departments of Agriculture 
(202)296-8680 



87 



Mr. Chairman and Members of the Subcommittee: 

My name is Richard Pasco, and I am presenting this testimony today on 
behalf of the "Commodity Distribution Coalition." This coalition is an 
informal group of agricultural associations that are strongly supportive of the 
U.S. Department of Agriculture's commodity distribution programs, which 
serves the dual purposes of providing the best possible nutrition for our 
nation's school children and of helping stabilize U.S. agricultural commodity 
markets. 

We appreciate this opportunity to testify on the Commodity Letter of Credit 
(CLOC) provisions contained in H.R. 8, a bill To amend the Child Nutrition 
Act of 1966 and the National School Lunch Act." We have great concerns 
about how the extension or expansion of the CLOC program would affect the 
future viability of the USDA's commodity distribution programs. 

Our coalition, which is representative of the agricultural community, is 
opposed to the continuation of the CLOC program. When the authority for 
the pilot sites testing the CLOC program and the cash alternative expire, the 
sites should be returned to the commodity system. We believe that the 
CLOC provisions of H.R. 8 threaten the long-term operational effectiveness of 
the overall commodity distribution system. 

Coupled with severe reductions in funding for commodity purchases under 
The Emergency Food Assistance Program (TEFAP), the continuation or 
expansion of the CLOC program would signal the beginning of the end for 
this country's commodity distribution programs. USDA's ability to stabilize 
agricultural markets through large volume purchases of commodities would 
be seriously compromised without the assistance of a significant commodity 
distribution program. 

The commodity program will be even more significant now that the Uruguay 
Round of the GATT is completed. With the successful conclusion of the 
Uruguay Round, the United States will face both a reduction in tariff receipts 
and a phase-down of direct price supports. Reductions in import tariff 
receipts that are used to finance USDA commodity purchases and provide 
direct funding to schools, will also effect the overall federal government 
assistance available for our nation's food assistance programs. Any phase- 
down of price supports and loss of tariffs will also make it more difficult for 
the U.S. to support agricultural production. 

It is also important to note that commodity purchases by the USDA only 
represent about 20 percent of the food acquired for the School Lunch 
Program. This leaves considerable flexibility to school districts which can 
continue to use the vast majority of funds that are remaining for other 
purposes, including labor costs and purchases of food locally. 



88 



Commodity Distribution Program 

For nearly 60 years, USDA commodity distribution programs have provided 
essential foods to numerous constituencies. These programs date back to 
the enactment of P.L. 74-320, on August 24, 1935. Section 32 of this 
statute provides that the Secretary of Agriculture may buy fruits, vegetables, 
meat, fish, and poultry items under a surplus removal program for donation 
to school food programs and other domestic food programs. 

Section 416 of P.L. 83-480, enacted in 1954, gave the Secretary of 
Agriculture additional authority to distribute to schools commodities 
obtained through price support activities. Therefore, grains, dairy products, 
vegetable oils, and peanut products are also available for distribution to 
schools. 

The statutory goal of the Section 32 commodity programs is to support U.S. 
agriculture when markets are weak. Only 13 percent of Section 32 funds go 
to directly support agricultural markets through the commodity program. 
The rest is available as cash for the child nutrition programs. 

Today, the central purchasing authority of USDA provides economical 
commodities for the school lunch and breakfast programs, the soup 
kitchens and food bank programs, the Food Distribution Program on Indian 
Reservations, the Commodity Supplemental Food Program, and TEFAP. 

The various USDA commodity distribution programs give the Secretary of 
Agriculture an extremely effective tool that he can use in providing 
assistance to America's agricultural producers. One of the major goals of our 
agricultural policy has been to stabilize the "boom or bust" swings in the 
farm economy. When markets are soft in a given commodity, the Secretary 
can help boost market prices by purchasing the commodity that is 
experiencing depressed prices. For many commodities, such as pork, beef, 
turkey, chicken, eggs, peaches, apples, cherries and many others, the 
commodity distribution program represents the only significant program 
available to the Secretary of Agriculture as a market stabilizing mechanism. 

USDA commodity programs have not only played a special role in the 
development of agricultural policy, but have played an important role in the 
development of this nation's nutrition programs. The commodities 
provided for the school lunch meals, for example, have played a key role in 
meeting the recommended nutritional needs of children, while keeping 
costs down. 



-3- 



89 



In recent years, the USDA and the agricultural community have worked 
together to improve the distribution program and the nutritional profile of 
products to meet the demands of recipients. By building on these 
improvements, the program will be able to meet the changing needs of its 
recipients and simultaneously support American agriculture. 

Commodit y Letter of Credit 

Originally established in the FY 1981 Appropriations Act for Agriculture, 
Rural Development and Related Agencies, the CLOC and Cash systems were 
created in the form of pilot sites, so they could be evaluated as an alternative 
to the commodity donation system in the National School Lunch Program. 
The initial demonstration project mandated a three-year study of the CLOC 
and Cash alternatives. 

After a number of reauthorizations by Congress and years of on-going review, 
it is clear that the commodity program now in place works better than the 
CLOC /Cash alternative. The more than a decade long study has yielded no 
compelling evidence sufficient to warrant Congress to again extend and even 
expand the number of CLOC sites. Congressional termination of the CLOC 
program is long overdue. 

We strongly support the USDA's position opposing all provisions in H.R. 8 
that make permanent the existing pilot projects that operate Cash in Lieu of 
Commodities or CLOC systems or expand the number of CLOC sites. As 
stated by the USDA "it is in the best interests of agricultural producers, 
administrators of commodity distribution systems, and recipients of the 
USDA's domestic commodity programs to retain the traditional commodity 
programs." 

Commodity Letters of Credit, or even cash given directly to schools, by 
themselves, cannot match the buying power of a single federal department 
(i.e. the USDA) in making large volume purchases of commodities. CLOC 
purchases are made at the consumer end of the food pipeline and purchases 
by the USDA are made at or near the producer end. 

In addition. USDA's commodity program assures the domestic origin of 
foods purchased, which is clearly a critical feature of the program. This 
assurance is not possible when products are purchased at the retail level, 
because current labeling requirements are not specific enough to provide 
local purchasers with this information. 



90 



We have serious concerns about the long-term implications of Section 1 10 of 
H.R. 8. If a whole state can opt out of the commodity distribution program, 
the Secretary of Agriculture's ability to have a positive impact on the market 
price of a particular commodity will be reduced over time, as the size of 
USDA purchases shrink. Moreover, as the volume of commodities 
purchased is reduced, the effectiveness of the commodity distribution 
network in providing commodities to food assistance programs outside of 
the school feeding program is jeopardized. 

National School Lunch Program 

The National School Lunch Program is one of the greatest beneficiaries of 
the Commodity Distribution Program, with approximately 25 million school 
children having access to commodities through this system. Altogether the 
USDA provides nearly $5 billion in cash and commodities to about 92,000 
schools nationwide. 

As previously mentioned, the commodities provided for school lunch meals 
have played a significant role in meeting the recommended nutritional 
needs of children. We believe that agricultural producers are natural 
partners with schools in providing nutritious foods for consumption. In that 
vein, we are dedicated to the continued improvement in the quality and 
variety of the products we make available for use in schools. 

Negotiated Rulemaking 

Section 103 of H.R. 8 also would require the Department of Agriculture to 
use the negotiated rulemaking process before publishing any proposed 
regulations addressing the nutrition requirements of the National School 
Lunch and Breakfast Programs. We believe USDA has done an excellent job 
in reaching out to seek comments from individuals and organizations 
through regional forums that were held around the country. 

Members of our coalition, however, have differing positions on the need for 
negotiated rulemaking provisions of the bill. Some believe that use of the 
Negotiated Rulemaking Act of 1990 would complement the effort to date, by 
providing an opportunity for affected organizations to sit down and discuss 
the specific points of new nutrition regulations, in order to obtain a 
consensus based proposed rule. 

Regardless of the approach to rulemaking, we all commend USDA for 
undertaking the important initiative to reexamine the nutrition 
requirements of the school nutrition programs in light of recent scientific 
advances in this area. 

-5- 



91 



The Emergency Food Assistance Program 

Although not relevant to H.R. 8, we also want the Committee to know our 
concern about budget cuts for The Emergency Food Assistance Program 
(TEFAP). TEFAP is one of the commodity distribution programs that was 
originally created to serve the dual purpose of eliminating farm surpluses 
and providing nutritional assistance to needy Americans. TEFAP continues 
to meet these goals, and has become an indispensible component in our 
nation's fight against hunger. 

TEFAP is the "last line of defense" for hungry Americans. It is a reliable 
source of important commodities which enable food banks across the 
country to increase the nutritious value of food packages and reach out to 
those who fall between the gaps of other federal food assistance programs. 
With minimal federal support, TEFAP is able to accomplish an essential 
service through its public/private partnership and enormous volunteer 
support. 

Not only is TEFAP a crucial part of our nation's hunger efforts — it also plays 
a vital role in disaster relief. When natural disasters occur, TEFAP 
commodities are immediately available for those in need. Food stamps are 
worthless when grocery stores are destroyed or transportation becomes 
nearly impossible. The TEFAP network is essential to a quick and 
coordinated relief response. From Hurricanes Hugo and Andrew, to the 
Midwest floods, to the San Francisco and Los Angeles earthquakes, TEFAP 
has provided food to victims of natural disasters that would not have been 
otherwise available. 

We believe a functional TEFAP initiative together with an overall healthy 
commodity distribution system are vital components in our efforts to 
maintain a strong and competitive agricultural sector. 



Conclusion 

We believe that any extension or expansion of the CLOC program is a step in 
the wrong direction. Therefore, we urge this committee to reject the 
provisions of H.R. 8 that further expand the number of CLOC sites. 

It is time to recognize that the CLOC program has been sufficiently reviewed 
after a decade of experimentation. We believe the day has come for 
Congress to put an end to this program. In times of serious budgetary 
constraints, the federal government can no longer afford the luxury of paying 
the administrative cost of dual programs that serve the same purpose. 



92 



Once and for all. we must choose the commodity program over the CLOC 
program. There is not sufficient justification for Congress to again extend 
the CLOC program one more time, and continue to administer overlapping 
programs. 

American Farm Bureau Federation 

American Meat Institute 

American Sheep Industry Association 

California Canning Peach Association 

California Cling Peach Advisory Board 

Canned Fruit Promotion Service 

National Association of State Departments of Agriculture 

National Broiler Council 

National Cattlemen's Association 

National Council of Farmer Cooperatives 

National Farmers Union 

National Grange 

National Milk Producers Federation 

National Pork Producers Council 

National Turkey Federation 

Pacific Coast Canned Pear Service 

United Egg Association 

United Egg Producers 



-7- 



93 



Testimony of the 

American Association of 

Classified School Employees 

Before the 

House Agriculture Subcommittee on 

Department Operations and Nutrition 

June 9, 1994 



The American Association of Classified School Employees (AACSE) 
thanks the Committee for the opportunity to submit testimony for the 
record regarding the Commodity Letters of Credit (CLOC) program. We 
hope that our perspective on CLOC, and the problems CLOC was meant 
to address, will be helpful to the Committee. 

The AACSE is an independent union which exclusively represents 
classified school employees. Classified workers are the people who 
provide the vital services that are essential to the operation of the 
nation's schools such as bus drivers, maintenance personnel, and teacher 
aides. Approximately one-third of our 250,000 members are associated 
with school food services. 

We appreciate that the U.S. Department of Agriculture (USD A) has 
a difficult job and administers numerous large programs which are aimed 
at agribusiness and farmers, the primary responsibility of the USDA. 
Participation in the school lunch program understandably seems at times 
to be an afterthought for the Department. 

However, classified employees have a primary responsibility to the 
welfare of school children and the orderly operations of the nation's 
schools. We therefore would ask the Congress to examine ways in which 
the current system is short-changing America's children and to adopt 
solutions such as H.R. 4221 by Congressman Bill Goodling and Congress- 
man Bill Ford, the leadership of the Education and Labor Committee. 

Our experience with the USDA has been mixed. Our affiliates 
generally like the program (particularly with more stable items than 
fresh produce such as flour, canned products, dry beans, and butter) but 
have reported problems in USDA's fresh commodity program, primarily 
the delivery of barely edible produce delivered in unrealistic quantities. 



94 



As the Committee knows, school meals provide some children with 
the best or only opportunity for nutritious food during a day. The link 
between solid nutrition and the ability to learn is not seriously disputed, 
and it is imperative that children receive every advantage we can 
provide them to perform in school. To reach those children already most 
at risk from the other effects of poverty, school food service workers need 
access to appropriate ingredients. Such access would also help us provide 
healthy, competitive alternatives to junk food for the benefit of the entire 
school population. 

It is in everyone's interest to make the USDA programs that deal 
with children and nutrition function to the best of their ability. It is 
with the understanding that USDA has enormous responsibilities 
mentioned previously that we offer our experiences with the programs 
that affect us directly. 

USDA allotments are often of questionable quality. The 

current USDA delivery system is inadequate to meet the needs of the 
nation's children. Having recently emphasized the need for more fruit 
and vegetables in the diet, especially among the young, USDA continues 
to defend a system which is unable to further that goal. 

Allotments are usually delivered six times per school year. 
Assuming the goods actually arrive in a usable state, it is unrealistic to 
believe that fresh produce can be prevented from spoiling for 30-45 days. 

Our members, and other food service workers across the country, 
have reported numerous problems with the condition of USDA foods: 

• A school food service professional from Cuter-Orosi Unified, 
California, reports that a USDA shipment of green beans arrived 
damaged and contained maggots. 

• USDA-provided cheese often stubbornly resists melting. Occasion- 
ally, the cheddar cheese is pink. 

• Members in Portland, Oregon, refuse USDA pasta outright because 
it is not of sufficient quality to be cooked and chilled. Another 



95 



member in California reports that their spaghetti dissolves into 
mush when it is boiled. 

• Poorly processed produce causes difficulties. Tigard, Oregon, 
received 75 cases of tomatoes which were not sorted by ripeness. 
In addition, no information was provided to properly ripen these 
tomatoes. About 15% of the order, which was huge to begin with, 
eventually spoiled. A district in California received blueberries 
which still had stems, causing a scramble to clean the fruit so that 
it could be used in muffins. 

• Several members reported that overripe fruit arrives which, while 
actually fine inside, appears so shrivelled that children will not eat 
the produce. 

• USDA often sends commodities which are inappropriate for school 
children. Oregon received cases of canned salmon, not a popular 
item among grade-schoolers and teenagers, and other districts have 
received so much figs, almonds, and dates that it took years to use 
them. 

• In addition to the poor quality of many USDA commodities, some 
items are more expensive than similar items available locally. 
Lansing, Michigan, School District notes that vendors can beat 
USDA's price in items such as breakfast egg biscuits, fruit pies, 
and tortilla chips and match the price on chicken nuggets. In the 
example from Lansing, USDA's chicken nuggets have almost twice 
the fat of nuggets provided through vendors. 

• Northview Public Schools, of Grand Rapids, Michigan, could only 
use about 63% of its allocated commodity food dollars this year. 
Northview's Food Service Director explained that fruit and 
vegetables "often (arrive) in an unusable state." The Food Service 
Director for Bay City Public Schools, Bay City, Michigan, noted 
that this district's actual use of its budgeted entitlement has been 
steadily declining since 1988 and currently stands at less than half 
of this year's $131,428 budgeted entitlement. 



96 



It is ironic that the very agency pressing for better nutrition for 
children through fresh produce -- and is willing to spend hundreds of 
thousands of dollars converting a food graph from a pyramid to a 
diamond shape -- is wedded to a commodity system that is completely 
unsuited to accomplishing its own higher goal of improved nutrition 
through more fresh fruit and vegetables. 

The current system needs more flexibility. The current system 
would benefit from the flexibility provided by CLOC in a number of 
areas. The involvement of State agencies is unnecessary and counterpro- 
ductive, and CLOC can help the entire system become more efficient. 
The following problems have been observed by our members: 

• An order of tomatoes was delivered to the Marysville, California 
School District during Spring Break; no one was there to handle 
the order. 

• In Portland, Oregon, a huge order of tomatoes was received that 
food service workers could not possibly hope to use before the 
produce rotted. 

• Portland is also receiving a "disproportionate" amount of a single 
commodity as its offered product: butter. This does not make any 
sense when trying to reduce the amount of fat in school meals. 

• USDA "ships at their convenience," in the words of one member, 
and it is often difficult to plan meals around unknown foodstuffs 
arriving at an unknown time. 

• Deliveries have been regularly left at curbside. USDA personnel 
have sometimes failed to notify recipients, resulting in a delivery 
which arrives when school workers have already gone home. The 
food is thus left out overnight. 

• A member from California told us that the standard shipment size 
(1,000-1,500 cases) is too large to process in a timely manner. 



97 



The current distribution pattern routes commodities through State 
agencies, adding a useless level of bureaucracy between commodity 
producers and local users of the goods. Attaching a superfluous 
middleman to the process adds costs that sap already depleted school 
budgets. Commodities are generally stockpiled and shipped every four 
to six weeks to school districts, adding warehousing and transportation 
costs compared to having the consuming school district purchase food 
itself. The delivery system increases costs while decreasing freshness 
and quality of the produce. 

In addition, the system has subtle pressures to accept a commodity 
shipment "as is." A particular district receives no benefit from turning 
down a shipment; the district is neither credited nor offered a replace- 
ment. Under the current system, it makes sense for Tigard, Oregon, to 
accept all 75 cases of tomatoes and let 15% rot rather than pass along a 
portion to several of the approximately 180 of Oregon's 200 school 
districts which received none of the tomatoes. The Tigard district had no 
idea at the time of acceptance what the product ripeness or overall 
quality would be. Of course, occasionally a product is too terrible to 
accept, regardless of the financial impact on the school. Also in Oregon, 
102 cases of turkey sausage was refused because of its unappetizing dull 
red color and taste. 

Giving school districts more control over commodity purchases 
through CLOC would allow an orderly flow of fresh produce into school 
meals; likely produce savings to partially offset the sometimes higher 
total costs of buying fresh foodstuffs; and allow States to shift personnel 
from a redundant function in the commodity delivery system to new jobs. 

Current CLOC pilot program users have expressed no 
interest in returning to the old system. In the best traditions of the 
marketplace, the strongest endorsement for an expansion of CLOC is the 
apparent satisfaction of those involved in the pilot. Under any fair 
reading of the term "pilot," the test of CLOC must be viewed as a success 
and should be brought to every State in the nation, if not every school 
district that wants it. 



98 



Given USDA's continuing and unbending opposition to CLOC, it 
seems implausible that USDA will ever consider the pilot successful 
(even though USDA is charged with performing exactly that analysis). 
There appears to be nothing but satisfaction with CLOC from those who 
actually prepare school lunches and, aside from some timely misinforma- 
tion about H.R. 4421, generally positive views towards that legislation 
as well. 

One group, representing commodities distributors in a large and 
rural State, claimed that H.R. 4421 would force all commodity recipients 
to use 10% of their commodity entitlement in the form of a cash CLOC 
for fresh fruit and vegetables, which this group claimed was impossible 
because of the State's climate. This group is receiving bad advice, for the 
legislation is clear that the 10% cash CLOC is an option, not a mandate. 
Indeed, the whole point of CLOC is more flexibility, not less. 

CLOC is clearly a success. We are confident that the vast majority 
of CLOC pilot districts are satisfied with the program, and we believe it 
is more than time to expand this valuable program through H.R. 4421 
and other means. 

CLOC begins to address these problems. All CLOC supporters 
ask is the ability to buy what is needed when it is needed. 

These chronic problems with quality and delivery lead us to believe 
that CLOC would be a welcome addition to the tools available for school 
food service workers to obtain fresh ingredients in a timely fashion. 
Local control improves the freshness of ingredients and the nutritional 
value of the meals provided to the children. Inappropriate items such as 
canned salmon and figs would not be used. Huge orders would not be 
routed to a few districts to rot. Delivery and planning menus could be 
managed more efficiently through controlled and reasonable purchases 
of commodities. 

We thank the Committee for its consideration and ask it to please 
expand the CLOC program for the good of America's school children. 



99 



-^— NATIONAL CATTLEMEN'S ASSOCIATION 

1301 Pennsylvania Avenue, NW . Suite 300. Washington, DC. 20004-1701 . (202) 347-0228. FAX (202) 638-0607 

llititfumfn: 

5420 South Quebec St—t . P.O. Box 3*69 . UnoHwocd. Colormdo 80 I 55 . (303)694-0305 . PAX (303) 694-2851 




Testimony 

on behalf of the 

NATIONAL CATTLEMEN'S ASSOCIATION 

in regard to 

Commodity Letter of Credit Provisions of H.R. 8 

submitted to 

Subcommittee on Department Operations and Nutrition 

of the 

Committee on Agriculture 

U.S. House of Representatives 

submitted by 

Elizabeth K. Johnson, M.S., R.D. 

Manager, Food Policy 
National Cattlemen's Association 

June 9, 1994 



The National Cattlemen's Association is the national spokesman for all segments of the 
beef cattle industry -- including cattle breeders, producers, and feeders. The NCA 
represents approximately 230,000 cattlemen. Membership includes individual members as 
well as 46 affiliated state cattle associations and 29 national breed association. 



100 



The Commodity Distribution Program is a tremendous benefit to USDA's food 
assistance programs as well as American agriculture. A situation is occurring right now in 
the beef industry that exemplifies these benefits. Beef tonnage is at a high level and will 
remain so throughout the summer. Beef production is the largest since 1986, and recent 
weekly beef supplies have averaged 50 to 55 million pounds more than during March 
1994. Cattle prices fell dramatically during mid-May. 

One important means of stabilizing the market and moving the increased supplies 
through the marketing system is the Commodity Distribution Program. The beef industry 
is asking USDA's Agriculture Marketing Service to take advantage of abundant beef 
supplies and make its beef purchases now for the federal school lunch program. Such a 
purchase will provide USDA program recipients with a good value for the dollars. It will 
also help a depressed beef industry by moving more product at a critical time. 
Additionally, it will help the many other agricultural industries and individuals which 
depend on the beef industry for business activity. Every dollar of cattle sales generates an 
additional $5 to $6 of business activity in the farm supply, food and other businesses. 

Although this particular example is with the beef industry, the Commodity 
Distribution Program aids all commodities in a similar manner. An expansion of the 
Commodity Letter of Credit program would greatly decrease the ability of the USDA to 
purchase beef both in a timely manner to take advantage of low prices and in the quantity 
necessary to assist in market stabilization. USDA program recipients, including school 
lunch participants, get less product for their hard earned money. 

The National Cattlemen's Association supports the continuation of the Commodity 
Distribution Program. The National Cattlemen's Association does not. support the 
Commodity Letter of Credit Program for the reasons outlined in the testimony from the 
Commodity Distribution Coalition. 



101 




CRS 



Congressional Research Service • The Library of Congress • Washington, D.C. 20540-7000 



June 9, 1994 



TO : House Agriculture Cofnmittee 

Attention: Julie Paradis and Lynn Gallagher 

FROM : Jean Yavis Jone^ 

Specialist in FooWtfncKAgrlculture Policy 
Environment andHNatural Resources Division 

SUBJECT : Commodity donations to child nutrition programs 



This responds to your request for information on the level of Federal 
commodity donations to child nutrition programs and on trends in commodity 
support relative to total child nutrition and school lunch program funding. 

In FY1993, the Federal government provided a total of $710 million worth 
of commodities to child nutrition programs. Most of this assistance ($618 
million or 87% of the total) was provided under the legislative mandate that a 
set value of assistance be provided for each lunch served under the school lunch, 
child and adult care food, and summer food programs. These are so-called 
"entitlement commodities." The remaining commodity assistance ($90.2 million) 
was provided as "bonus," that is, from perishable stocks acquired by the USDA 
for farm support reasons that would be wasted or spoiled if not distributed. 
Additionally, $2.4 million in administrative funds were used in FY1993 to help 
the USDA administer alternative commodity systems (e.g. commodity letters of 
credit, or CLOC). 

Most commodity assistance goes to the national school lunch program, 
which is the largest of the child nutrition programs. In FY1993, the USDA 
reports that this program received $574.3 million worth of commodity 
entitlement assistance. This represented 93% of all commodity entitlement 
assistance provided to child nutrition programs. 

In FY1993, $14.7 million (or 2.5%) of the entitlement commodity assistance 
provided to the school lunch program was provided in the form of cash or 
commodity letters of credit in lieu of USDA commodities. This form of non- 
commodity support went for school lunch programs in the State of Kansas ($6.9 
million) and for the cash/CLOC project areas authorized to operate alternative 
commodity systems under the current law ($7.8 million). 

Overall, the proportion of child nutrition program assistance provided by 
the commodity entitlement has fallen since 1981 when Congress enacted 
substantial program reductions in child nutrition programs, and prior to the 



BOSTON PUBLIC LIBRARY 

102 



CRS2 3 9999 05018 589 9 



enactment of the current Cash/CLOC pilot project. ' In FY1981, the value of 
entitlement commodities for child nutrition programs totalled $632 million, and 
represented 16.5% of total Federal child nutrition program support. In FY1993, 
the value of entitlement commodities for child nutrition programs totalled $618 
million, or 8.4% of total Federal aid to child nutrition. This includes the value 
of commodity assistance provided through cash/CLOC commodity alternatives. 
If the value of this alternative assistance is deducted from the commodity 
entitlement, the value of commodity entitlement assistance provided in the form 
of USDA commodities falls to $576.5 million, and represents only 7.9% of total 
Federal aid to child nutrition. 

The program most affected by changes in commodity entitlement 
reimbursements is the national school lunch program. In FY1981, an estimated 
$569 million worth of commodities were provided to this program under the 
entitlement authority. This represented 19.3% of the total cash and commodity 
support mandated for the school lunch program in that year ($2.9 billion). This 
contrasts with FY1993 when commodity entitlement assistance for the school 
lunch program ($574.3 million) represented only 12.2% of the total Federal 
support mandated for the school lunch program ($4.7 billion). 

Most of the decline in the proportion of commodity support for child 
nutrition programs can be explained by the fact that in the 1981 budget 
reduction law the Congress approved a substantially larger cutback in the per 
meal reimbursement for commodities than in the cash reimbursements for 
meals. 2 Moreover, in recent years the index used to determine automatic 
inflation adjustments of the commodity reimbursement rate has grown at a 
slower pace than the index used to make inflation adjustments for cash 
reimbursements. And, finally, program participation declines following the 1981 
legislative cutbacks in child nutrition were greatest among non-poor, or so-called 
"paying students." Since the commodity program does not vary payment rates 
by a child's family income, the increased proportion lower income participants 
(whose meals receive substantially higher cash subsidies than non-poor children) 
has meant that Federal funding growth has been greater for the cash part of the 
child nutrition programs than for the commodity part. 



1 Omnibus Budget Reconciliation Act of 1981 

2 It should be noted that following the 1980 and 1981 budget law reductions 
in commodity assistance, there was a substantial increase in USDA donations 
of "bonus" commodities. This was due in large part to enormous CCC holdings 
and the need to dispose of huge inventories to prevent waste. Between 1980 and 
1987, the average per meal "bonus" donation for child nutrition programs rose 
from 2.5 cents to 11.2 cents per meal. This more than made up for the 
entitlement cutbacks and thus schools did not feel their impact as greatly as 
otherwise might have been the case. With the decline in CCC holdings 
beginning in FY1988, however, bonus aid began to drop back closer to the 1980 
level: 9.2 cents per meal in FY1988, 8.1 cents in FY1989, 2.7 cents in 1990, 2 
cents in FY1991, 3 cents in FY1992, and 2.7 cents in FY1993. 



103 



CRS-3 



School Lunch Program: Cash and Commodity Support 
Selected Years FY1980 - 1993 

($ values in millions) 



FY 


Total School 

Lunch 

Support 


Cash 
Grants 

i 


Commodity 

Support 

(mandated) 

a/ 


Commodity 
% of total b/ 


1980 


$2,939.3 


$2,370.5 


$568.8 


19.3% 


1985 


3,123.8 


2,659.7 


464.1 


14.8 


1986 


3,134.9 


2,681.0 


453.9 


14.4 


1987 


3,447.6 


3,000.8 


446.8 


12.9 


1988 


3,413.0 


2,935.0 


478.0 


14.0 


1989 


3,510.7 


3,004.9 


505.8 


14.4 


1990 


3,759.9 


3,230.0 


529.9 


14.0 


1991 


4,109.3 


3,553.2 


556.1 


13.5 


1992 


4,437.6 


3,870.1 


567.5 


12.7 


1993 


4,704.2 


4,129.9 


574.3 


12.2 


% 

Change 
since '80 


+ 60% 


+ 74% 


+ .1% 


not 
relevant 



a/ Includes the value of cash in lieu of commodities and CLOC. Since FY1985 
cash/CLOC values have totalled in the range of $11.6 million to $14.7 million 
annually for the Kansas and cash/CLOC projects. 

b/ Represents the proportion of total Federal support provided to the school 
lunch program, not the proportion of food value provided by commodities. 



o 



ISBN 0-16-045870-6 





9 780160"458705 



90000